NZ Shares In Stocks Sheepish
Posted 02ndFebruary 2001

Corporates heading overseas and falling share prices slashed almost a quarter off the NZ sharemarket's value last year ­ reinforcing concerns by shareholders the the big companies are deserting the very shores that gave them birth. Figures compiled by the Securities Commission show the combined capitalisation of New Zealand companies had tumbled to $42.06 billion at the end of last year, down $12 billion or 22 per cent from their $54.3 billion market value a year earlier. The figure excludes the portion of overseas company shares held by Kiwi investors. Of concern is the desertions, indicating a corporate consnsus that the NZ market is a sinking ship, better to get off asap. Witness Fletcher Paper's sale, Lion Nathan's head office move to Australia and a 13 per cent slide in the indicator NZSE 40 capital index (driven by an almost halving in Telecom's share price) as aggravating an already thin market in the past year. "It does create issues for us," Stock Exchange chairman Simon Allen said on Wednesday. "But the financial community transcends national boundaries now. "It's a global trend across many small economies and markets."

The desertions by Fletcher Paper and Lion Nathan, along with Telecom's overwhelming share price weakness through most of last year, saw most the sharemarket's value erosion coming from the top 10 companies. However, the value of trades last year increased almost 10 percent to $26.9 billion, the commission's figures show. Seems foreigners who largely own the larger companies want to leave but smaller home-grown investors don't. Mr Allen said many of the factors contributing to the sharemarket's falling value were outside the exchange's control. They included world financial market conditions, New Zealand economic conditions and the performance of New Zealand companies. "But the exchange will do anything it can to increase market volumes and attract companies and investors." The challenge is to ensure new companies listed replace the bigger ones that were taken over or moved overseas. An impossible challenge while the absolute freedom of finance and capital movement is condoned by NZ Governments. Even the NZ stockmarket itself is trying to leave. The latest figures come as the New Zealand exchange hierarchy tries to clinch a merger deal with the Australian exchange with a view to combating the New Zealand market's liquidity problems.

Mr Allen said nothing had changed in the merger talks since the two exchanges reported before Christmas that they hoped to complete negotiations in the first three months of the year. By comparison, the Australian sharemarket did reasonably well last year. Its domestic market capitalisation increased 4.1 percent to A$675 billion (NZ$842 billion). The number of transactions jumped 44 percent to 14.8 million. One thing is definite, the sheepish attitude of many New Zealanders is leading them to Australia, leaving one can only presume, New Zealand's famous independent way of life intact and undiluted.