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Have your say on what can be done to revive NZ's capital markets

Thursday 9th May 2019

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Is it all the fault of journalists focusing only on poorly performing listed companies, or is it just that New Zealanders highly value their privacy and anonymity?

Or is it just that NZX’s listing rules and its continuous disclosure requirements are too onerous?

The steering committee charged with trying to revive equity listings, called Capital Markets 2029, is calling for submissions on what measures could be taken to make capital markets more vibrant and to create a broader capital market ecosystem.

“Some believe New Zealanders highly value privacy and anonymity. Once the entity is listed, wealth becomes immediately visible. Alternative exit pathways (are) perhaps seen as more desirable as they offer greater privacy,” the committee, headed by Martin Stearne, a corporate consultant and former managing director of merchant bank FNZC, says in a paper aimed at stimulating comment and ideas.

“Some believe that the listing process is ‘too hard’ due to rules, regulations and time taken out from running the business and that, once listed, it also looks ‘too hard’ due to continuous disclosure requirements,” it says.

“New Zealand media has traditionally emphasised the negative performance of listed companies,” the paper suggests.

Any journalist could tell them that people are so much more drawn to 'bad' news than they are to 'good' news stories.

“High-growth, loss-making, companies have been criticised in the New Zealand market,” the paper says. “However, equivalent companies in foreign jurisdictions are celebrated for their growth story and future success,” it says.

The committee is also canvassing opinions on what is working well in New Zealand’s capital markets, what funding gaps exist, how to provide better access to growth capital and how to encourage more retail participation in capital markets.

“It is hard to access advice on capital market investment unless the investor has a substantial sum to invest,” the paper notes.

It also asks what specific steps each of the NZX, the Financial Markets Authority, brokers and listed companies could take to encourage broader retail investor participation.

The New Zealand Shareholders' Association certainly has plenty of ideas on that front – only last week it was expressing outrage that pharmaceuticals and animal products distributor Ebos had chosen to raise money from professional investors through a placement, thus shutting out and therefore diluting its retail investor base.

In March, when the members of the steering committee were announced, the association noted its disappointment that nobody on the new body represents retail investors.

The committee also wants feedback on KiwiSaver, noting that it is expected to grow from $50 billion to more than $150 billion during the next 10 years.

“KiwiSaver has been described by some as a great savings product but not necessarily a strong investment product,” the paper says.

“Some have observed the mismatch between the long-term nature of the investors’ timeframes versus the short-term nature and liquidity of most of the underlying investments.”

The committee is also calling for submissions on regulation, the regulators and tax settings.

Submissions close on Friday, June 7.


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