NZX: Lot rests on global economy

18:22, Feb 18 2013

NZX says profit growth will largely hinge on the number of companies listing on the New Zealand sharemarket next year, but the earnings stream looks vulnerable to economic shocks.

Speaking after the release of the securities market operator's annual results yesterday, chief executive Tim Bennett said a notable pickup in the number of companies looking to list was supported by anecdotal reports from investment banks and advisers.

However, any deterioration in the global economy would see the listing pipeline quickly dry up as investors and business owners turn risk-adverse.

The Government has already signalled it will stall the listing of the state-owned energy companies if market conditions are not supportive, potentially delaying the Mighty River Power initial public offering or IPO, earmarked for the second quarter of this year.

"The global economic environment, while benign at the moment, is fragile," Bennett said. "Europe hasn't resolved its debt crisis . . . the US may look to balance its budget in April or May, or we could see a slowdown in China, which would impact our market."

However, should the investment outlook keep to its current track, he said the increase in IPOs would provide a major boost to the sharemarket operator.


A big float such as Mighty River would generate listing fees of $700,000 to $800,000, as well as boost trading activity as retail investors come into the market and institutional shareholders rebalance their portfolios.

That would be a welcome relief after a moribund 2012, where extremely low levels of capital raising generated revenues of $56 million, up 2.3 per cent compared with the previous year.

Only two equity-type securities were floated in 2012 - Moa brewery and the Fonterra Shareholders Fund (FSF).

Higher staffing costs related to the FSF and a series of one-off expenses saw bottom-line profit fall 32 per cent to $9.9m.

NZX shares closed 2.3 per cent lower yesterday at $1.27, but have gained about 8 per cent over the past 12 months.

If the IPO revenues fail to materialise, Bennett said, the NZX's agricultural data, information and trading businesses - which account for over two-thirds of revenue - should generate single-digit growth in the year ahead.

Trading activity is already at elevated levels, up 22 per cent year-on-year, with the FSF and sell-downs of cornerstone stakes by institutions boosting liquidity in the market.

A dividend of 1.25 cents per share was declared, in line with NZX's policy of increasing shareholder payments by 1c per year, payable on March 22. Fairfax NZ

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