Friday 5th May 2000
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The incredible shrinking New Zealand sharemarket has suffered another implosion in the liposucting decision by brewer Lion Nathan to migrate its bulky capitalisation to Australia.
Lion had already made it into the new Australian Standard & Poor's indices when other big Kiwi listings such as Telecom and Fletcher Challenge missed out.
Getting into the new Australian indices can represent a big deal for a share price. Already Lion's shares are showing the difference for having Australian fund managers add its stock to their routine shopping lists. A boost in share price from Australian and other institutional demand can assist in capital raising through equity issues and also borrowing cost control where indexed to stock value.
In any event, borrowing costs can be lower in Australia and there would be greater income stability in not needing to convert Australian revenue into New Zealand dollars for company reporting purposes.
Other major New Zealand corporates may be taking notice such as Contact, Telecom, and Fisher & Paykel where they have existing or intended significant asset ownership and market share across the Tasman.
Not to be forgotten also is the long unresolved matter of mutual non-recognition of share dividend tax credits transtasman. Australian franking and New Zealand imputation credits represent competing tax breaks that will gradually favour being based on the other side of the Tasman for those companies with growing Australian shareholdings.
A related effect of the decline of the NZSE through transtasman company relocation is the likelihood of more company takeovers and delistings such as the Fletcher Challenge empire is facing. Share prices are likely to fall locally as the attractiveness of New Zealand corporate domicile declines. Combined with a weak Kiwi dollar, the cheapness of local shares will make a tempting target for buyout.
The Stock Exchange will not be saved by its new listings board. Giving rats-and-mice companies an easy entry into public listing is no substitute for offering major corporates of a size and liquidity interesting to institutional investors.
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