6 Dec 2013

Fund manager says NZ politically risky

8:02 pm on 6 December 2013

An overseas fund manager has called New Zealand "as politically risky as Pakistan", and is reluctant to make further investments there.

In an article published online, Jason Pidcock refers to the Government reneging on a pricing agreement with telecommunications company Chorus.

Mr Pidcock, from Newton Asian Income, says its €5 billion fund is down more than 7% and he puts that largely down to losses in New Zealand.

On Friday, Chorus shares fell to a new record low of $1.27.5, before recovering to close at 1.32, down 6 cents.

Earlier on Friday afternoon, Chorus shares fell as low as $1.27.5 - a new record low.

Labour finance spokesperson David Parker says the Government has created uncertainty for investors with its reaction to Chorus. And, he says, it's not the first time.

"There have been bailouts for Rio Tinto which were plainly motivated by the Government's desire to sell the shares in Meridian," Mr Parker says.

"That sort of unprincipled behaviour is unsettling to investors to the extent that there is some truth in the comments that are being made from overseas. The finger should be pointed at the Government."

But Tower Investments former chief executive Sam Stubbs says New Zealand is a transparent country, and it should not be a surprise when stock prices move because regulators and politicians have been involved in highly sensitive and politicised industries.

As well, it is important to separate short-term price movements from the long-term attractiveness of companies.

"If you're a short-term investor looking for short-term returns, these things can be highly frustrating," he says.

"But if you're looking at it for the long term, and if you're looking at New Zealand in the context of 'how attractive are our power company and telecommunication company investments versus other parts of the world', well, if you're sensitive about political and regulatory risk, this is one of the better countries to be investing in."

Accountancy firm Ernst and Young Australia has told the New Zealand Government that Chorus may not be able to fulfil its contract on time after the Commerce Commission halved what it could charge for copper broadband. A final report into its finances will be released next week.