13 Aug 2020

NZX buoyant: 'Public markets perfect for times like this'

2:53 pm on 13 August 2020

A move by listed companies to strengthen their finances through capital raisings has contributed to a strong first half for the stock exchange.

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The NZX went from around 19,000 trades a day to a peak in April of 112,000. Photo: Supplied / NZX

Exchange operator NZX's profit was up 40 percent to $9 million as a host of companies raised nearly $6 billion of equity in the six months to June.

NZX chief executive Mark Peterson said that flowed through to secondary trading on the market which was a boost to income.

"We've seen a rise in activity right across the board whether it's local retail and institutional investors or even interest from offshore. I think there's a few factors at play - asset class relativity is definitely one of them - obviously the banks aren't paying as much as they used to.

"Then you've got the likes of Sharesies which has given folk access to the market who might not have had it before."

The NZX went from around 19,000 trades a day to a peak in April of 112,000, which put some stress on the infrastructure. Peterson said it had moved to replace systems and had also commissioned a report seeking recommendations of what more could be done.

"The popularity of online retail trading platforms is burgeoning and over the Covid-19 alert levels three and four in New Zealand helped spur retail participation to levels never seen before in our sharemarket."

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Covid-19 has helped spur a high level of interest in the New Zealand sharemarket, NZX chief executive Mark Peterson says. Photo: Supplied

NZX secondary market trading by retail investors totalled around $2.1bn for March and April 2020, more than double that of the same period last year. The total number of trades climbed 361 percent.

Peterson expected more companies to come to the market to raise money in the second half.

"The appetite is absolutely there... I'd imagine we will see some more. The [access to capital] is going to prove invaluable in these next periods. Companies are wanting to shore themselves up, are looking for diversification of funding sources.

"The banks are thinking carefully about their balance sheets... they'll want to be supporting companies no doubt about that but if there are other options on the table I'm sure they'll be suggesting those to businesses as well and the public markets are perfect for times like this.

"We've been speaking to a lot of funds looking to list as well and to some extent you need the right environment for that and Covid brought a bunch of volatility which delayed a few of those so I'd expect to see those in the second half of the year."

Peterson also said he expected the regulatory arm of the business to have broken away from the commercial side by the end of the year.

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