Capital Markets Bridging the gap
Section D
Thursday, May 8, 2014
The mixed-ownership model has contributed to a ‘significant up-tick’ in sharemarket activity
O
Christopher Adams
ne of the key architects of the Government’s state asset sale programme says New Zealand’s capital markets are sitting on a solid foundation following the sell-down, which has driven increased interest in New Zealand equities both here and overseas. Rob Cameron, the executive chairman of Wellington investment bank Cameron Partners, who headed the Capital Markets Taskforce that recommended the sales in 2009, says developing a mixed ownership model through the listings of Mighty River Power, Meridian Energy and Genesis — as well as a block sale of already listed Air New Zealand — has resulted in investors having ‘‘much better choices’’. ‘‘The way I look at it is from the point of view of the capital markets,’’ Cameron says. ‘‘The Capital Markets Taskforce showed it [the market] didn’t serve retail investors’ needs particularly well. There were quite big gaps in the sort of products offered, particularly substantial lower-risk investments.’’ He says the asset sale programme has also been a ‘‘big heads-up for overseas investors’’. It is ‘‘neither here nor there’’ that the Government didn’t quite reach the upper end of its revised target of raising $4.6 billion to $5 billion ($4.67 billion was raised) out of the sales, Cameron adds. ‘‘There’s 115,000 new retail investors registered in this, which is significant as a proportion of our population and there’s very little doubt that if the Government had chosen to just auction off the shares to all comers internationally it could have got higher prices but it would have had much less impact on our capital market and particularly the participation of retail punters.’’ Shares in Meridian and Genesis have risen well above the prices they
NZX’s Tim Bennett: a broad range of firms have expressed an interest in floating this year.
were listed at, while Mighty River Power shares — which listed at $2.50 — were trading at $2.33 on Monday after falling as low as $1.95 in January. Air NZ shares have gained ground on the price they were sold at in the November block sale. Brett Shepherd, chief executive of investment banking at Deutsche Craigs, says 2013 was a ‘‘watershed year’’ for New Zealand’s capital markets. ‘‘Because there was more product
[available] we got more international institutions being interested, which created greater liquidity in the New Zealand marketplace,’’ Shepherd says. ‘‘The platform from last year — both the scale of what took place which is unprecedented and the quality of product across the board — just resulted in greater international interest across the marketplace.’’ Cameron says having companies like Genesis and Meridian on the
market has ‘‘filled a hole’’. ‘‘In terms of giving New Zealand bigger, deeper capital markets and in terms of giving investors better choices, this has been very successful,’’ he says. ‘‘The MOM model has undoubtedly contributed to a significant up-tick in trades that we’ve seen — about 30 per cent over the last year — and the environment it’s creating for IPOs [initial public offers] more generally.’’ NZX chief executive Tim Bennett is bullish about the prospects for new sharemarket listings in the year ahead. He says about 40 companies are mulling listings and up to eight have taken the next step and appointed advisers — a good indication of how serious they are about going public. More than $7 billion of new capital was listed in 2013 through 10 New Zealand IPOS, while an additional $5.7 billion was deployed into the market via secondary capital raisings and sell-downs by strategic investors. Technology listings dominated the smaller end of the IPO market last year through the listings of SLI Systems, GeoOP, Wynyard Group and Snakk Media. Bennett says firms from a broad range of sectors have expressed an interest in floating this year, including ‘‘more traditional businesses where technology is not at the forefront. We’re particularly pleased by the diversity of companies that are thinking about listing.’’ Private training provider Intueri Education Group will raise as much as $234 million in a dual NZX/ASX float this month. Intueri, being spun out of its Australian-listed parent Arowana International, is expected to become New Zealand’s biggest private training establishment — by domestic students — with 6000 local enrolments and a further 1000 international students each year, across 26 locations. It also
owns half of Online Courses Australia. Meanwhile, the $300 million float of Hirepool — New Zealand’s biggest equipment rental business — will take place during the first half of the year. Technology companies including Eroad and Triplejump have indicated they may list, while there has also been speculation that Scales Corporation, a Christchurch-based fruit and vegetable marketer, is preparing for a sharemarket float. Bennett says the NZX’s new Growth Market, designed to provide a cheaper and lower compliance market for small and medium-sized businesses, is expected to be up-andrunning by the middle of the year. It will have website separate from the main NZX site and investors who want to take part will have to certify they have read and accepted a risk warning before investing. Instead of a full prospectus, companies will be required to prepare a listing document, which includes projections against key operating milestones, but will not have to forecast financial information. The NZX will also begin offering equity derivatives on June 16. Such products, which are common overseas but haven’t been available in New Zealand for many years, give market participants such as fund managers a tool for hedging risk. Futures contracts will trade off the NZX20 index, which was launched in 2012. The stock exchange is also planning to launch single-stock options, says Bennett. Salt Funds Management managing director Paul Harrison says the unavailability of equity derivatives has been a ‘‘glaring absence’’ in the New Zealand market. ‘‘It’s an important tool that’s available to fund managers in most markets,’’ Harrison says. continued on D6
Debating our next move Rob Cameron Changes have produced significant improvements in our capital markets — a healthier environment for retail investors, markets which function more effectively as an engine of growth. — D20
David Parker Labour’s upgrade will address external deficit of over $10 billion by making sure we export more overseas to pay our way in the world. The investment pillar of the upgrade requires support for capital markets. — D21
David Skilling Further strengthening our capital markets and national saving performance is vital to building economic resilience and sustaining our economic performance. — D22
Sean Keane David Parker will be in the running for the Nobel Prize if this elusive prescription proves to be effective. — D23