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Contact drops on NZX's 'free-float' changes

Tuesday 20th March 2012 1 Comment

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Shares in Contact Energy, the power company half owned by Australia’s Origin Energy, fell after the NZX said it would only recognise the ‘pure free float’ of shares available for trading when it determined index weightings.

The changes, to start in June, will reduce the market capitalization of the NZX 50 by $3.2 billion to $35.98 billion, NZX said yesterday. They will see index-weighted funds trim holdings of companies relegated by the changes.

The new methodology will also have a bearing on the weightings of the four state-owned energy companies being taken public in a sell down that will leave the government holding just over 50 percent in each.

Contact, which is 52.4 percent owned by Origin, fell 2 percent to $4.68 and has declined about 7 percent this year. Its weighting on the benchmark index will fall to 4.58 percent from 8.7 percent and nudge the stock down to fifth largest from third, NZX said. 

Sky Network Television, which is 43.7 percent owned by News Corp and 11 percent by Todd Communications, fell 1.1 percent to $5.20.

“The share prices has fallen on the back of this news,” said Rickey Ward, domestic equities manager at Tyndall Investment Management. “How much they will fall I don’t know. We can only use what is happening now as a benchmark for what happens once the rulings take effect.”

By contrast, Sky City Entertainment Group’s weighting will rise to6.1 percent from 5.6 percent. The casino and hotel operator doesn’t have a significant cornerstone shareholder.

Fletcher Building will remain the largest listed company in the index, at a weighting of 12.5 percent, up from 11.5 percent at present. The new methodology will apply to all equity indexes from June 15, and an updated document will be released next month.

NZX sought submissions on new weighting rules last year in preparation for the partial floats from state-owned energy companies.  As well as the new methodology, the stock exchange will introduce the NZX 20 Index on April 23 with even tougher liquidity requirements.

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Comments from our readers

On 21 March 2012 at 11:22 am Miles Cross said:
Isn't it about time NZX did something to encourage investments ? This smells of another kick in the butt!
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