NZAX trading dwindles, highlighting lack of risk appetite
The number of trades on the NZX’s Alternative Market for small and unconventional companies has dwindled to near the lowest since it began in 2003, highlighting local investors’ lack of risk appetite.
Total trades fell 47% to 154 in September, worth $2.5 million, or just 0.6% of the market capitalisation of the 26 securities listed on the NZAX. There were 147 trades in November 2003, the first month of operation.
The market value of the NZAX fell 46% to $390 million. Trading also fell on the NZX Main Board, though the 6% decline left the value of trade at $2.1 billion, or a healthier 4% of market capitalisation.
“Risk tolerance has certainly decreased in the last few years,” said Grant Williamson, a director at Hamilton Hindin Greene in Christchurch.
There’s “a lot of excellent value on the main board at the moment” and some investors prefer mainstream stocks for their dividend yield.
New Zealand investors have been battered by loss of savings in finance companies and the sense that their household wealth has weakened. Williamson said Synlait’s unsuccessful attempt to go public last year highlighted the drop in risk appetite, with the milk processor finding ready capital from China’s Bright Dairy & Food instead.
The NZAX was established as a lower-cost marketplace for small companies, giving them the opportunity to raise capital and attract investors but with less onerous disclosure requirements and cheaper listing fees than the NZX’s main board.
The index has dropped about 60% over its life while the benchmark NZX 50 Index has climbed about 10% in the same time.
Total trades on the NZX debt and equity markets fell 13% to 49,394 last month and the total value of trade fell 8% to $2.2 billion.
Trades on the NZX Debt Market fell 8% to 4,022, with value of trade falling 32% to $104 million, or 0.7% of its $15.49 billion market
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