Market slump imminent in New Zealand stocks

Tuesday 15th December 2009 PRESS RELEASE

Market slump imminent in New Zealand stocks…

Anthony Limbrick, Chief Investment Officer of Pure Capital Limited (Pure Capital), a Wellington-based investment manager is warning investors to brace for a potentially destructive market slump in New Zealand equities.

“We question the momentum and sustainability of a global recovery principally based on the extraordinary injection of monetary liquidity – against what will be a structural debt overhang at consumer and government level for many years. The bull move in global equities from the March lows has been pretty anaemic over the last few months – and for us this warns of a trend lower again. This could be a large, possibly even a violent move. We hope not.”

From a fundamental economic perspective, Mr Limbrick said the prospect of higher interest rates, a persistently weak terms of trade, and over-indebted New Zealand consumers add up to significant economic headwinds – despite the glimmerings of recovery that have emerged in recent months.

Said Mr Limbrick, “the New Zealand economy has shown some resilience with some good primary export news, but current economic settings are non-optimal for the markets and economic environment of the next 12 months. We think these could be a significant drag on growth. The New Zealand sharemarket will reflect this. Our analytics suggest the back of the year’s uptrend has already been broken”.

Wellington, New Zealand-based Pure Capital is a quantitatively-driven investment manager specializing in “targeted non-correlation” i.e. wholesale investment solutions designed to smooth the returns of investment portfolios. Pure Capital has over NZD $60 mln in assets under management with a client base principally domiciled offshore.

ENDS

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