Fund manager AMP Capital, which manages $16 billion, expects a string of investment opportunities on the New Zealand sharemarket will suck up to $2 billion in new funds from investors this year, reversing the trend of the last decade.
Head of equities Guy Elliffe told a client presentation in Wellington that the local stock exchange faces a “materially” busier year than normal in terms of capital raisings, and with demand that could see demand for a net $2 billion in extra funds on top of any dividends or redemptions.
For most of the last 12 years, there has been a net reduction in total funds invested, a trend reversed late last year at the time of the $555 million Fonterra Shareholders Fund float.
The $2 billion estimate is still about twice the net outlay investors put up last year when Fairfax Media sold out of online auction site Trade Me and the FSF listed on the NZX. Companies have typically raised between $500 million and $1.5 billion a year of fresh capital over the past decade.
The most high-profile events this year are likely to be the government’s planned sale of to 49 percent of two of its three electricity companies. The partial privatisation was to raise between $5 billion and $7 billion, though somewhat less than half that is likely to be raised this year, since plans for two other partial floats and to increase the public shareholding in Air New Zealand will not occur this year.
New Zealand shares went a long way last year, with the NZX 50 index rising about 25 percent in its best year since 2004. That pushed up stock valuations,, with dividend yields down about 100 basis points and price-to-earnings ratios up by two multiples.
“They’ve moved from the bottom of the long-term range to the top,” Elliffe said.
While that rally is unlikely to repeat, Elliffe is upbeat on the prospects for the local market with the unusually high number of capital raisings on the cards this year.
“That gives us really good stock specific opportunities in 2013,” he said.
AMP Capital head of strategy Keith Poore told the briefing he still expects “positive returns from New Zealand equities, but probably below the rest of the world.”
The fund manager’s Australasian equity allocation has started the year overweight Australia with higher earnings growth across the Tasman expected to offset higher dividend yields in New Zealand.