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Home / Business / Business Reports / Capital markets report

Time for Prospectus NZ?

By Fran O'Sullivan and Tim McCready
NZ Herald·
17 May, 2017 07:23 PM4 mins to read

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Surely it's time for our sharpest brains to come up with a major campaign to spruik New Zealand as an investment destination and go hard on capital markets? / File photo.

Surely it's time for our sharpest brains to come up with a major campaign to spruik New Zealand as an investment destination and go hard on capital markets? / File photo.

New Zealand is in a sweet spot.

Surely it's time for our sharpest brains to come up with a major campaign to spruik New Zealand as an investment destination and go hard on capital markets?

"I just think the genie is out of the bottle with New Zealand," says Nicholas Ross, country head for UBS New Zealand. "People are just going to keep coming and coming and coming."

"If there was ever a time to be bold and to borrow a bit more this is it," he adds. "Markets are in very good shape, they are very receptive to good proposals and interest rates are very low."

It is a stance shared by a growing number of senior NZ capital markets players and business leaders.

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New Zealand arguably remains behind the pace when it comes to applying financial leverage to fully fund the growing infrastructure gap sparked by rocketing net migration.

A Government spooked by a series of major earthquakes is wary of accruing too much debt in case it needs to use its balance sheet in the event of another costly natural disaster or recession. But this appears short-sighted when Trump's America and Brexit have affected international perceptions and this country is increasingly viewed as a safe haven for people and capital.

Auckland Chamber of Commerce CEO Michael Barnett points out there are many options for funding the city's growth.

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But they all require capital.

Commonwealth Bank's Andrew Woodward says the NZ debt market has shown it has the capacity to complete larger project finance transactions.

Woodward - who is general manager of CBA's NZ operations - points to Transmission Gully and the Puhoi-to-Warkworth projects, which attracted support from domestic and offshore banks and investors and competitive outcomes for the NZ Government.

He says the continued success of this style of transaction - as well as funding of significant investment by the likes of Auckland Council and Auckland Airport - will continue to rely on domestic and increasingly international debt markets supporting growth projects, with both having targeted international debt markets to meet their growing funding requirements this year.

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Says Woodward: "To aid the further development of the NZ debt market there continues to be a strong role for Government in outlining a clear pipeline of projects (across a range of asset classes including toll roads, prisons, hospitals, and rail projects), so foreign capital keeps New Zealand on the radar, as well as ensuring legislation around areas such as interest withholding tax are competitive versus other jurisdictions, and encourage investment in New Zealand.

"While the domestic debt market can meet requirements up to a certain capacity, foreign capital is expected to play an increasing role to meet the planned infrastructure spend."
Kiwis who have collectively saved more than $40 billion in KiwiSaver - an average of just under $15,000 per person - might also question whether investment allocations are structured to deliver sufficient funding for NZ growth (and the needs of savers).

Australian research firm Strategic Insight has released figures showing total KiwiSaver balances hit $40.651 billion at the end of March; up from $38.416b at the end of December.

With KiwiSaver poised to turn 10 this year, it is worth asking whether more avenues for investment should be provided onshore.

In its report, World awash with Money, Bain & Company looked at capital trends through to 2020.

The consultancy firm predicted that for the balance of the decade, markets will generally continue to grapple with an environment of "super-abundance".

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It says there has been a power shift from the owners of capital to the growers of good ideas. "In this environment, investors' success will be determined less by how much money they command than by their ability to spot an investment's true creation potential and act on it nimbly.

Those that can react with speed and adaptability will be best able to identify the winners, steer clear of bubbles and generate superior returns."

There is an abundance of innovation in New Zealand. Time for that Kiwi prospectus to fund our growth and our ideas.

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