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NZX, FMA launch capital markets review

Thursday 24th January 2019

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Stock exchange operator NZX and the Financial Markets Authority have formed a formal review - Capital Markets 2029 - to investigate the drivers of listing activity.

“New Zealand’s capital markets have performed well in a number of areas – such as KiwiSaver and debt issuance,” NZX and the regulator say in a joint statement.

“However, equity listings have remained subdued and (the) listed equity market is under-developed relative to global peers.”

Equity listings on NZX fell by 21 to 138 at the end of December from a year earlier as companies large, such as accounting software company Xero, medium sized, such as chicken company Tegel and engineering firm Opus International, and small, such as skincare products company Trilogy, all departed the boards.

That’s down from the 173 equity securities listed on NZX in December 2015, indicating it’s been a long, slow burn.

Total market value of equities listed on NZX at Dec. 31 was $129.6 billion, down from $135.2 billion a year earlier.

The new year promises more of the same: e-commerce software company SLI Systems delisted earlier this month after a successful $41.4 million takeover offer.

While SLI Systems is a relative minnow, two of NZX’s mainstays, Trade Me and Restaurant Brands with market capitalisations of $2.5 billion and $1 billion respectively, are dealing with takeover proposals.

The silver lining for NZX of the Restaurant Brands offer by Mexico-based Finaccess Capital is that it only wants 75 percent so the shares will remain listed.

NZX’s debt board has been somewhat more successful, lifting total debt securities to 132 with a market capitalisation of $30.1 billion at Dec. 31 from 113 worth $26.4 billion a year earlier and 89 worth $19.8 billion in December 2015.

Today’s statement says companies listed on the S&P/NZX 50 Index generate more than $24.6 billion in GDP and employ close to 10,000 New Zealanders, according to research NZX commissioned from the New Zealand Institute of Economic Research published in February last year.

The actual NZIER report says those 50 companies employed more than 96,300 workers.

NZX’s latest initiative was to axe its two junior equity boards, ASX and NXT, pushing all those companies onto the main board, and targeting managed funds to list by simplifying their listing rules, including removing many of the requirements imposed on other listed companies.

NZX now counts 38 funds on its board, up 2.9 percent from a year ago.

“NZX has delivered some fundamental changes to the market over the past 15 months, such as increasing on-market liquidity and simplifying the market’s structure and rule set,” NZX chief executive Mark Petersen says in the statement.

“But we only play one part in New Zealand’s capital markets ecosystem. It is now important that we bring the industry together to focus on accelerating the growth of our capital market."

FMA chief executive Rob Everett says the review “responds to concerns expressed about the overall depth and breadth of our capital markets.

“From early-stage capital raising and investment opportunities all the way up to main board listings and institutional investor appetite, we felt the time is right to plan for the future. We are keen to see the industry take this forward and take a good look at how the system is working,” Everett says.

The two organisations have appointed Martin Stearne, supported by accounting firm EY, to head the review. The results are expected to be published in the September quarter.

Stearne is a corporate consultant and a member of NZX’s listing sub-committee and was recently appointed to the Takeovers Panel. He was an investment banker with FNZC and its predecessors for 20 years, ending his tenure there as managing director.


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