This year has got off to a relatively quiet start. Only one small sharemarket float has taken place - freight and logistics operator Fliway Group, which raised $25 million last month.
However, investment banks are working on a number of potential deals behind the scenes including building supplies company Carter Holt Harvey, financial risk insurer CBL Insurance and tertiary training roll-up Base Education. Bankers are also hopeful that media firms NZME - whose brands include the New Zealand Herald and NewstalkZB - and TV3 owner MediaWorks will eventually come to market as IPOs.
Martin Stearne, a managing director of investment banking at First NZ Capital, says there will be fewer floats in 2015 than last year, as the supply of potential issuers has thinned out following the completion of the Government's asset sale programme and private equity exits, such as the IPOs of Z Energy, Scales Corporation and Metro Performance Glass. Still, he reckons up to eight IPOs could take place this year.
"The last three years have been very active, both in the number of floats and in size and I think it's a mark of the depth of our market that they've all been readily absorbed," he said.
"I think [the IPO activity] has put New Zealand back on the radar of offshore investors."
Those gains have underpinned local capital markets action, such as the $6.6 billion in new capital that was listed last year through 12 IPOS. Almost $2 billion was raised through 165 follow-on capital raisings by existing issuers in 2014.
The partially-privatised power firms - Genesis Energy, Meridian Energy and Mighty River Power - have proved particularly popular with the foreign investors hunting for dividend yields.
Stearne says there could be an increase in block trades of shares as escrow periods expire on recently listed stocks. They are agreements existing shareholders make prior to an IPO, which forbid them from selling shares. "Once that escrow expires, those shareholders are free to sell and there are a few of those out there from IPOs of the last two years," says Stearne, who declined to name any potential block sales.
"A trend we expect to see in the medium-term is some of those blocks coming through to market."
Ross Christie, of Wellington investment bank Cameron Partners, says though it is looking quieter on the IPO front this year, institutional investors still have appetite for quality offers. "There are funds and investors out there that clearly have money to invest in product," he says. "Plus there's retail money there for the right opportunities." He says potential remains for listings of smaller, growth-focused firms.
"Although, given there have been quite a number of growth company listings, they need to be well-formed and sensibly priced," Christie says. "In our view the window [for IPOs] remains open."
David Gibson, co-head of investment bank Deutsche Craigs, says investors are becoming more cautious about growth-stage technology IPOs. The post-float performance of recent tech listings has been a mixed bag. Some - such as software developers Vista Group and Eroad, which both listed last August - have notched up impressive share price gains.
Others, including travel booking software provider Serko and measuring device developer ikeGPS, have had a disappointing run so far. Like Stearne, Gibson says this year it will be difficult to match the number of IPOs that took place in 2014. "There's probably not the wardrobe of big deals that we saw in the last three or four years, but we'll see relatively constant volumes albeit smaller deals.
"I do think there will be a reasonable amount of [IPO] issuance, particularly in the second half of this year. My guess is that we will see four or five deals in the second half."
On the debt front, Gibson says low interest rates make for an attractive environment for corporates to raise capital through bond issues. "The cost of debt margins has come right in. And with maturities coming off on a whole lot of [debt] issues, there's a shortage of product ... it's a pretty attractive time to be issuing at the moment."
Last month dairy giant Fonterra attracted $100 million of oversubscriptions for its 2021 bonds, which raised $350 million and will pay annual interest of 4.33 per cent.
Gibson says this country's relatively strong economic performance will drive continued interest in this country from overseas investors. "That [economic performance] is very relevant to the way capital comes into New Zealand. When I think about the last few years, one of the big shifts has been the willingness of offshore capital to look at New Zealand."
He says the large IPOs of recent years - such as Meridian, Mighty River, and the Fonterra Shareholders' Fund - required foreign capital.
"Offshore institutions did the work, at a macro level, on New Zealand - that was the starting point - and we got the tick," he says. "I do think the high-growth, relatively high yield environment New Zealand has, as well as stable government, strong migration and the earthquake recovery, lends itself to a positive environment for attracting offshore capital."
Gibson says there is scope for continued mergers and acquisitions (M&A) activity. There were some big M&A deals last year, including the roughly $1 billion sale of Carter Holt's pulp, paper and packaging businesses to Japan's Oji Holdings and Innovation Network, as well as Beijing Capital Group's $950 million purchase of Australian waste management firm Transpacific Industries' New Zealand assets.
"Globally we're seeing M&A volumes recover [following the global financial crisis] and in New Zealand we are also seeing that with some large ticket deals being done using foreign capital. M&A will continue to grow, I think, in the next year or two."
But there's one big question on many a market watcher's lips - how long can the good times roll on? The NZX 50, which gained 18 per cent over 2014, rose another 3 per cent between January 5 and May 8.
Craigs Investment Partners head of private wealth research Mark Lister says he expects conditions will remain buoyant for some time, although after years of strong returns many stocks had become expensive.
The New Zealand market is currently trading at close to 20 times forward earnings, well above the historical average since 2001 of about 15 times.
"It's becoming increasingly difficult to find good, well-priced opportunities," Lister says.
"The market's not going to see the same gains that it has over the last few years.
"My key issue in terms of headwinds for the market is that valuations are looking stretched from this point, which means future returns will be lower."
He says everything comes back to the low interest rate environment.
"That's really the key difference compared to other cycles.
"We've never seen a period where interest rates are so low, or negative in many cases around the world. That's been one of the key drivers of why this bull market has pushed on for so much longer and more strongly than many people have predicted."
In its latest monthly investment outlook, Craigs says the link between stock values and interest rates has become so extreme that signs of worsening economic conditions actually push up share prices as investors assume that means rates will stay low for longer.
Lister said many investors have become complacent about the risks facing markets.
"We've had so many good years in a row now and people have sort of forgotten that there's a lot of fragility in the world economy.
"We've still got very high debt levels, risks around Europe and geopolitical issues with Russia and the Middle East and so forth.
"One thing that does worry me is people getting complacent, thinking it's been plain sailing for the last five years so let's just carry on."
