NZX reported third quarter revenue growth of 3.9% in its Q3 2016 revenues and operating metrics released today. The most significant contributors to this growth were higher funds management revenues, and listing fees for new debt listings, which continues an exceptionally strong year for New Zealand’s listed debt market.
While New Zealand’s capital markets and funds management sector remain in very good health, challenging conditions in the dairy sector continue to impact NZX’s Agri business. A summary of revenue by operating segment is provided below.
Markets
Revenue in NZX’s markets business was up 5.4% compared to Q3 2015 driven largely by growth of NZX’s debt market, which listed $2.16 billion of new debt during the quarter.
Total secondary capital raised during the quarter was down 80.0% compared to Q3 2015, which included significant capital raisings by dual-listed Australian banks.
Trading volumes rose 4.8% leading to an increase in securities trading revenue of 6.0%. However, this was offset by a fall in clearing revenue, down 1.9% as total value traded fell (in part reflecting the sell down by Origin Energy of its stake in Contact Energy in Q3 2015).
The S&P/NZX 50 Index was up 31.6% for the 12 months ended 30 September 2016.
There was one equity listing on the NZX Main Board in Q3 2016, Investore Property. NZX also welcomed New Zealand King Salmon to Main Board last week, the year’s third IPO.
Dairy Derivatives revenues in Q3 2016 were the second highest quarter recorded to date, with Q3 2015 the all-time highest quarter. Dairy futures volumes were significantly higher in Q3 2016 than Q2 2016 due to increased volatility in commodity prices, after a sustained period of stable low prices.
Market operations revenue was up 14.2% on Q3 2015 due to high levels of energy consulting work.
Funds Management
Revenue in NZX’s Funds Management business, which comprises the SuperLife superannuation and KiwiSaver business and the Smartshares Exchange Traded Funds business, increased 21.3% on Q3 2015.
SuperLife’s KiwiSaver Funds Under Management (FUM) grew 35.4% year on year, while total SuperLife FUM increased by 20.5%.
Excluding funds invested by SuperLife, Smartshares FUM increased 13.6% year on year, while total units on issue (including those held by SuperLife) increased by 62.1%.
NZX Wealth Technologies made strong progress during the quarter announcing two major new clients, Craigs Investment Partners and Macquarie Equities New Zealand. Both are expected to be transitioned onto the NZX Wealth Technologies platform in the first half of 2017.
Agri
Total volumes of grain traded on the Clear Grain Exchange in Q3 2016 increased by 104.9% compared to Q3 2015. The relatively low price environment has resulted in a more drawn-out selling period this harvest driving revenue growth of 84.5% in the quarter.
This contrasted with the performance of NZX’s Agri business, which continues to feel the effects of reduced confidence in the New Zealand dairy sector as a result of a decline in dairy commodity prices in 2015 and the first half of 2016. Advertising page equivalents in that business fell 38.9% in Q3 2016, and while growth in data revenues provided some offset, total agri information revenues were still down 18.7%.
Regulation commentary
NZX also published its Q3 2016 regulation metrics today. NZX Regulation commenced 21 investigations into issuers during the quarter, down from 35 in Q3 2015. In addition, 15 investigation were completed in relation to participants, compared to 18 in Q3 2015.
In August 2016, NZX published ‘Our Approach to Enforcement’ which sets out NZX Regulation’s approach to enforcing market rules and forms part of NZX’s ongoing commitment to facilitating a culture of compliance, transparency, and effective market regulation. It replaced the previous NZX Enforcement Policy.
Best practice issuer compliance was a key theme at NZX’s Annual Issuer Forum held earlier this month in Auckland. NZX presented to listed issuers a range of information regarding administrative trading halts and the disclosure of material information; dealing with disclosure obligations in developing market scenarios; and key considerations for issuers transacting with related parties.
