General | Feb 05 2006
New Zealand equities performed strongly in March, the gains causing both GSJB Were and ABN Amro to review their asset allocation models and equity weightings.
For GSJB Were the rise in the market means it is time to take an even more conservative position, the broker moving to a 3% underweighting in New Zealand equities compared to benchmark, as opposed to its 2% underweight position last month. At the same time, it has maintained its 3% overweight position in global equities.
With less money in Kiwi equities the broker’s cash weighting has increased to 4% overweight compared to 3% previously, while there is no change in its positions in either bonds or New Zealand property.
The biggest change in weighting is in the New Zealand dollar, where the broker has halved its underweight position to 3% from 6% in the previous month. It suggests the recent sharp fall in the currency makes a consolidation more likely, while the change in economic conditions has reduced the chance of the Reserve Bank of New Zealand (RBNZ) cutting interest rates in the short-term.
ABN Amro is also looking to adjust its recommended equity portfolio, partly to re-invest the cash it will receive from accepting the takeover offers for both Carter Holt (CAH.NZ) and Waste Management (WAM.NZ).
In the broker’s view there remains some value opportunities in the market despite the strong gains last month, so it is looking to add to its holdings in Nuplex (NPX.NZ) and Infratil (IFT.NZ).
Similarly it suggests corporate activity may extend to other sectors, so it will attempt to increase its weighting in Port of Tauranga (POT.NZ) in the expectation the port sector will see further consolidation.
As it was previously under-exposed to the property sector the broker is looking to add a position in Kiwi Income Property Trust (KIP.NZ), while it will also look for an opportunity to increase its holding in Vector (VCT.NZ).
Helping finance these additions will be a lower holding in Tenon (TEN.NZ), which reflects the recent downgrade in the broker’s rating on the stock.
