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NZ capital markets – new direction needed

NZ capital markets – new direction needed

Just a single IPO and Xero’s decision to leave for the ASX were the biggest disappointments in a difficult year for the NZ capital markets in 2017, says Simpson Grierson.

The law firm says NZX’s recognition of the need for change - underscored by its market consultation on the merits of differential boards - is only a step in the right direction and that broader changes are required.

Simpson Grierson Partner James Hawes would like to see the marketplace explore ways to set itself apart from other regions rather than simply attempting to close the gap to global peers.

“The NZX’s proposed changes to streamline through board consolidation, reduce compliance costs and support better product diversity are a good indication that new ideas are being explored to further develop the NZ capital markets,” says Hawes.

“We expect that the growth of KiwiSaver will bolster a strong NZ capital market in 2018 but the key opportunity lies in differentiating our offering from those of other regional markets – for example, through a focus on agriculture, infrastructure financing or co-operatives - while still supporting domestic champions.”

The law firm believes that given the current national focus on infrastructure and the need for private money, there is an opportunity for NZX to act as a host for those vehicles which connect retail investment with the projects that need it most.

“Infrastructure investment is an urgent priority and the Government has stated it is open to ‘innovative finance mechanisms’ – including public-private partnerships,” says Hawes.

“This tells us that private money will have a role to play in financing these projects, both at the central and local government level, especially as authorities look to get crucial infrastructure underway without upsetting debt levels.”

Hawes says that one obvious way to fund these types of projects is through BOOT models or third party ownership of the infrastructure asset, but also expects authorities to explore every option.

“This should open up a range of investment opportunities that could be structured as infrastructure bonds, managed investment products or listed equity.

“In any event, by positioning itself as the host for investors to access these investment vehicles, NZX would be empowering New Zealanders to build the facilities their country needs.”

ENDS

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