NZX held its annual Listed Issuer Forum in Auckland on Monday, attended by a record number of senior executives from listed companies and NZX stakeholders. More than 150 people attended the forum from more than 100 organisations.
Topics covered included:
• NZX update: presented by CEO Tim Bennett and Head of Markets Mark Peterson
• Investing in listed companies, an institutional investor’s view: presented by Brian Bourdôt, New Zealand Super Fund, Manager NZ Equities
• Board communication and interaction with shareholders and the investor community: presented by Tony Carter, Chairman, Air New Zealand; Chairman, Fisher & Paykel Healthcare; Director, Fletcher Building; Director, ANZ Bank New Zealand; Independent Chairman, Blues LP
Forum address by NZX CEO Tim Bennett
In his address to the forum, Tim Bennett discussed the outlook for New Zealand’s capital markets; the opportunities and challenges NZX sees ahead; and the areas of long term market development that NZX is focussed on.
Key themes of the presentation were:
1. Capital markets matter
• To fund business growth and realise New Zealand’s economic potential, New Zealand needs a deep, liquid capital market
• Successive governments realised this in the late 2000s and through a range of initiatives, took up the challenge of rebuilding the capital markets, in particular through the work instigated by the Capital Market Development Taskforce in 2009
2. We are making progress, but are not yet at half way
• New Zealand's capital markets have had an outstanding past five years thanks in no small part to a stable, growing economy and a significant market development programme
• If the Australian experience is anything to go by, where compulsory superannuation was introduced in the 1990s, our markets are at the start of a 10 to 15-year growth journey. We are not done yet – in some ways, we are not yet at half-way
• New Zealand’s equity market capitalisation to GDP is currently around 40%; to be a real engine of economic growth, it should be 60-70%
3. Unfortunately, we sometimes have a habit as a country of thinking the job is done, when actually we have only just made a good start
• There are some warning signs ahead - a lack of focus on previously agreed direction in terms of market development; a sub-optimal structure of the KiwiSaver market inhibiting development of the fund management industry; and increasing integration of the New Zealand and Australian markets, limiting development of the capital market on this side of the Tasman
- Firstly, actions such as the endorsement of an unregulated market are disappointing and point to an apparent loss of focus in sticking to the widely consulted on and endorsed reforms that have been put in place
- Secondly, the structure of the KiwiSaver market and, by extension, the fund management industry, was highlighted by Treasury in a report released in September. Particular concerns are the concentration of providers, with 93% of assets under management held by six providers, and the lower level of allocation to growth assets which has negative implications for future retirement income
- Thirdly, we are seeing increasing integration of the New Zealand and Australian capital markets. For large listed companies we are already the most closely integrated markets in the world. However, for small and mid-sized businesses, both private and public, a strong domestic capital market, including a range of fund managers focused on smaller business, in New Zealand is critical
- The current focus of Australian investors on NZX-listed companies reflects the relative strengths of our economies, which will change over time. And the historical Australian government measures designed to grow Australia’s fund management industry are now, ironically, being used to inhibit the growth of New Zealand’s funds industry
• The implication for capital markets development in New Zealand is that we are not experiencing the development of fund managers focused on small and mid-sized businesses that we require to support growth of the equity market
4. The opportunity ahead
• There will be an additional $40B in KiwiSaver accounts over the next five years. Simplistically, we can either invest those funds offshore, or we can invest in New Zealand businesses, which will reduce our external debt and provide the foundation for future economic growth
• To be successful we need a single minded, unwavering commitment to our markets and New Zealand market development – this is the responsibility of all participants in the markets, on behalf of all New Zealanders
- We have had a strong start to the rebuild of the capital markets but we can’t be complacent
- To use a sporting metaphor, we have a great first half - let’s all work together to ensure we have a terrific second half
NZX Regulation update
NZX Regulation hosted a series of workshops at the forum that focussed on a range of topical regulatory matters and market trends affecting listed issuers, intended to provide interactive and practical support for issuers. Sessions were hosted by senior staff from NZX’s Regulation, Policy and Market Services teams, along with Chapman Tripp.
Topics covered included:
• Life cycle of a secondary equity capital raise
• Issuers’ disclosure obligations
• NZX’s frontline surveillance function and regulatory involvement in price movements
• NZX Policy update
• Recent regulatory trends in the capital markets, presented by Chapman Tripp
NZX Head of Market Supervision Joost van Amelsfort commented: “NZX Regulation is committed to providing an ongoing programme of support and engagement with the market on key regulatory issues.”
“Supporting issuers to facilitate and develop a best practice compliance culture is fundamental to the operation and functioning of vibrant markets, which drives investor confidence and market integrity.”
NZX Regulation held a series of similar workshops last week in Christchurch for issuers unable to attend the forum, and will continue to host workshops throughout New Zealand during 2016.
