Your Quarterly E-Zine
Edition 11 • December 2019

This website contains the latest edition of Forsyth Barr Focus, a quarterly on-line magazine written by senior members of Forsyth Barr's investment team.

If you experience any difficulty in accessing Forsyth Barr Focus,
please call 0800 367 227, or e-Mail editor@forsythbarrfocus.co.nz for assistance.

 

A decade for growth

The Capital Markets 2029 Taskforce was established by NZX and the Financial Markets Authority with the objective of creating a ten-year vision and growth plan for our capital markets. The Taskforce has just released its final report comprising 42 recommendations which are intended to create greater wealth for New Zealanders and promote stronger capital markets

Earlier this year, together with nine other senior figures from New Zealand’s financial sector, I was pleased to be appointed as a member of the Capital Markets 2029 Taskforce steering committee. The Taskforce was formed with the objective of creating a ten-year vision and growth plan for New Zealand’s capital markets.

Over the past six months, the Taskforce has analysed a number of trends that were earlier identified as having the potential to undermine the effectiveness of our capital markets and have long-term consequences for the wealth of New Zealanders, if left unaddressed.

In particular, the Taskforce recognised that:

  • while New Zealand’s KiwiSaver regime encourages saving, it also fosters investment predominantly in lower-growth assets and has limited exposure to private (i.e. non-listed) markets;
  • a large number of New Zealanders are not actively participating in KiwiSaver, either as “pre-retiree savers” or, more recently as “retiree investors”;
  • New Zealand’s two-tier public market is working well for larger companies, but is less liquid and effective for smaller companies;
  • the stock exchange is struggling to attract new listings;
  • private markets are working well and growing, but not necessarily serving the full range of New Zealand investors, nor the full range of investment stages; and
  • while New Zealand has a sound regulatory regime, there are some areas which could be improved to assist the flow of capital.

There are a number of factors which underpin these trends. With a sharemarket capitalisation comprising around 40% of GDP, New Zealand has a small and relatively under-developed sharemarket, which when combined with the rising tide of regulation around the world can act as a barrier to growth.

Moreover, as savers and investors, many New Zealanders exhibit significant conservatism with their investment choices (as evidenced by their KiwiSaver investment selections).

Earlier this week, the Taskforce released its final report, which comprised 42 recommendations intended to improve New Zealand’s capital markets in one or more of the following ways:

  • to raise the level of individual investor participation and engagement;
  • to offer more choice of investment for individual investors, both within KiwiSaver and more generally;
  • to grow the base of companies that can access the public capital (listed) market, reduce the barriers to listing where possible and increase motivation for public companies to remain listed;
  • to grow the private capital eco-system in New Zealand, encouraging innovation providing opportunities for businesses with long-term growth potential;
  • to use the capital markets to fund infrastructure in New Zealand; and above all
  • to create greater wealth for all New Zealanders.

Working alongside Government and New Zealand’s regulatory bodies, market participants (including Forsyth Barr) are working to improve the financial capability of New Zealanders at all stages of their lives, to ensure that they make appropriate savings and investment decisions which support their life goals.

As an NZX Founding Member and Market Participant, Forsyth Barr will continue to positively contribute to the ongoing development of New Zealand’s capital markets and I look forward to helping implement the recommendations of the 2029 Taskforce.

 

Neil Paviour-Smith
Managing Director

For a printable PDF of this article click here