NZX squeeze on brokers closes investment avenues for SMEs: Fed Farmers

Paul McBeth

Wednesday 11th August 2010

The NZX has blocked investment in New Zealand's small- and medium-sized enterprises (SMEs) by keeping the squeeze on the dwindling number of brokers, according to Federated Farmers.

President Don Nicholson told members of the Shareholders' Association the NZX does not reflect New Zealand's SME economy, and called on the Commerce Commission to investigate the barriers to entering capital markets.

"The NZX forced broker consolidation so that there are fewer companies to champion listings and of those that remain, there is a strong bias against risk inherent in the SME sector," Nicholson said.

The rival Unlisted market, which operates an unofficial alternative to the NZX, has the potential to provide capital to this sector, but has struggled to attract new listings and gain access to brokers, Nicholson said.

"Do you think NZX will welcome competition with open arms, well no, I don't. This is why the Commerce Commission needs to look into the barriers for entry," he said.

New Zealand's capital markets have been a source of consternation for successive governments since the slump in 1987, and the current administration is looking to adopt measures from this year's Capital Markets Development Taskforce report to stimulate interest public floats.

Federated Farmers' Nicholson highlighted the dwindling access to capital as a major concern for the rural sector, with banks unwilling to underwrite ventures like they used to before the credit crisis and collapse of the mezzanine debt market.

"There is a need to diversify farm and commercial lending and that could come by a capital injection into KiwiBank to provide added competition in commercial and rural lending," Nicholson said. "Yet the Government has KiwiBank in a corporate no-man's land. It's unwilling to extend it capital to grow while being unwilling to cut it loose. KiwiBank is between the devil and the deep blue sea."

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