Shrinking NZ sharemarket not in crisis - 'but it's not far off'

Wednesday, 15 February 2017

'We're keen to have a viable capital market,' says Roger Willis.

The number of companies listing in New Zealand this year is negative before it has even started.

It was not a crisis yet, but with plenty of investor funds floating about, money could start flowing out of New Zealand, Chapman Tripp partner Roger Wallis said.

Wellington med-tech company Volpara Health Technologies listed on the ASX in 2016.

Chapman Tripp's New Zealand Equity Capital Markets report, released on Thursday, said the drop in the number of companies listing on the New Zealand stock exchange last year was likely to continue as a trend in 2017.

There were only three listings last year - Tegel, Investore Property and New Zealand King Salmon - but many chose to bypass the NZX in favour of private sales or to list on an overseas exchange, particularly the ASX in Australia.

* New Zealand crowdfunding platforms gearing up for big 2016**

Wallis said this was not a good thing, and in fact there had already been more delistings this year than there were listings last.

'We're negative before we even get started.'

The law firm only expected about three listings in 2017, which it said was disappointing given the relative performance of the ASX.

Wallis said there was a concerning trend of New Zealand companies which were incorporated here, had staff here and payed tax here, which opted to list in Australia.

Some examples last year included Powerhouse Ventures, Volpara Health Technologies and 9 Spokes.

He said the NXT market, which launched in 2015 to target smaller businesses worth between $10 million and $100m, had not really worked and crowdfunding platforms, such as Snowball Effect, had successfully raised money for companies in a number of deals.

Furthermore, half of the top 50 companies on the NZX were dual-listed on the ASX where there were pools of money waiting to invest.

'We're keen to have a viable capital market,' Wallis said.

'Money continues to pour into KiwiSaver, I don't think the supply of funds is the issue.

'It's not a crisis but it's not far off.'

Wallis said he thought the NZX got distracted last year, particularly with its litigation involving Ralex, and needed to chuck money at asking companies why they would list on the ASX rather than in New Zealand.

He suggested rolling the NXT and NZAX into one market was a no-brainer given their poor performance and the early success of crowdfunding.

Otherwise, he felt the NZX could be turned around, particularly given the comparative strength of the economy and the quality of capital markets regulation here.

If investors did not find opportunities to invest here they would find it elsewhere, he said.

'There are some good companies out there but most are listing on the ASX.

'We see signs of life, some of the things are pretty easily fixed.'