NZ branded as risky as Pakistan

TIM HUNTER
Last updated 15:05 06/12/2013

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An overseas fund manager has branded New Zealand as risky as Pakistan after losing money on investments in Chorus, Meridian and Mighty River Power.

Jason Pidcock, manager of the London-based $8.7 billion Newton Asian Income Fund, was quoted in investment newsletter Citywire overnight saying New Zealand's political environment was a disincentive to investment.

"We are not going to invest any more money in New Zealand for the foreseeable future," he said.

"We have to rank it up with places like Pakistan in terms of political risk. This is a shame because it ought to be a developed and stable country."

Pidcock's fund lost 7.2 per cent since the end of October and the performance was mostly attributed to its New Zealand investments.

"I now have to associate New Zealand with political risk," said Pidcock.

"There was an extraordinary event in November where the Government reneged on a pricing agreement with telco firm Chorus."

In early November the Commerce Commission, an independent regulator, published its final decision on how much Chorus could charge for access to its copper telephone lines. Chorus estimated the move would cut its operating profit by about $142 million a year, or 21 per cent.

The Government appears to have backed away from proposals in August to over-rule the commission.

Pidcock blamed the Government for the effect on Chorus's share price.

"It was a failure of the New Zealand Government and it has caused a lot of upset in the investment community," he said.

"It is akin to reducing the coupon on a government bond and has caused a lot of upset to the investment community in the country."

One local fund manager described Pidcock's comments as "ridiculous".

"These foreign guys are going to leave New Zealand with their tails between their legs and so they should."

Some funds had just taken advantage of cheap money flowing from the US Federal Reserve's quantitative easing and just looked for high income stocks around the world, he said.

"They have never done the due diligence they should have. Instead of deep analysis of the business model it was just a search for yield."

In an NZX disclosure yesterday BNY Mellon, a holding company for fund managers including Newton, said its related entities had sold 1.5 million Chorus shares on December 4, contributing to a drop in its stake from 7.5 to 6.3 per cent.

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