Time to rethink asset allocation: Leckie

Perpertual Investmets head of investment market research Brigette Leckie says now maybe the time for investors to rethink their asset allocation because of changing economic environment.

Friday, April 8th 2005, 6:32AM

She says over recent years investors have developed a strong home bias, partly at the expense of allocations to international shares.

However the global economic backdrop is now “solid and broadly based” and investors should look to again move money offshore.

Things have changed from the United States economy was the only game in town during the last decade.

Leckie says Japan is recovering and “it would be dangerous not to have some exposure to the Nikkei.”

Restructuring in Europe, caused by the European Union enlargement, had produced strong earnings growth from companies.

Leckie says investors should have some exposure to commodities which are going to benefit from the urbanisation of China, India, Indonesia and Brazil.

Her view is that commodities are in the “early stages of a super cycle.”

Added to that the currency is “in a sweet spot” and likely support rather than detract from portfolios at the moment.

She says both the Australian and New Zealand dollars are above fundamental value and likely to come back at some stage. Her view is that the long run value of the Kiwi versus the United States dollar is around 59c.

Leckie also gave a warning to be cautious about investing in residential property, fixed interest and, for the short-term, infrastructure.

She says residential property in New Zealand is over priced. An analysis looking at the pricing on a price/earnings ratio basis puts the housing sector on a p/e of 25 versus around 14 for the sharemarket.

While Leckie is cautious on fixed interest she doesn’t think there will be large capital losses such as those which occurred in the early 1990s.

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