NZ investors starved of agricultural investments says taskforce head

Thursday 17th September 2009

New Zealanders are starved of opportunities to invest in agriculture, the largest sector of the economy, and this will only change when public markets are more attractive to farmers, says the head of the Capital Markets Development Taskforce, Rob Cameron.

Speaking at the INFINZ annual conference in Rotorua, a day ahead of announcements on Fonterra's new capital structure, Cameron said New Zealand was "overweight in agriculture" and this "should be reflected in our public markets".

"We need to find ways to make our markets more attractive to agricultural cooperatives by creating mechanisms that work to meet their specific requirements," said Cameron, who has advised on the Fonterra capital plan, although he referred in his presentation notes only to Silver Fern Farms and the impending creation of a tradeable milkpowder derivative which the NZX will launch later this year as a hedging tool for the dairy industry.

"There is also a potential for government to examine ways in which organisations it currently owns, such as SOEs, might participate in our public market without compromising control objectives,"Cameron said.

Government dominance of infrastructure and utilities also robbed New Zealanders of as wide a range of investment opportunities as exists in many other developed countries.

Cameron advocated for new rules to make it easier for small to medium-sized enterprises with growth ambitions to access public markets by relaxing disclosure thresholds for certain types of sophisticated investors and cut compliance costs which might otherwise discourage a public capital-raising by a smaller company.

"Given the relatively small size of many of our companies, we need to make the transition from private company as low as possible for those that want to make that transition," he said, pointing to the development of unregistered exchanges as one stepping stone towards that objective.

Recent changes to the Takeovers Code had also captured an unduly large number of firms and its cost for small firms is high.

"At the moment, unregistered exhcanges operated under threat of being required to become registered exchanges. They need regulatory certainty in order to develop. There seems to be no obivous reason why a registered exchange should not be able to own and operate and unregistered exchange as a stepping stone to the registered market."

Such exchanges might operate "opt-in" regulatory regimes" which participating companies would abide by and build their reputations against.

Cameron called for changes that would encourage institutional investors, including KiwiSaver funds, to be able to take more interest in the private equity market and to help support the growth of smaller, aspiring firms to boost the numbers coming to public market listing.

He also warned that the Financial Advisers Act could inadvertently place "unnecessary costs on advisers who are working with firms rather than retail investors and those working to facilitate private capital raisings".

While there was often criticism that the New Zealand capital markets lacked depth and liquidity, research by the taskforce into NZX share price movements had found that "depsite turnover being relatively low, the price discovery mechanism on our market works well".

"For similar-sized companies, the bid-ask spreads for the larger New Zealand companies are generally tighter on the NZX than they are on the ASX. The market serves these companies reasonably well," Cameron said.

Businesswire.co.nz

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