International interest in New Zealand's capital markets has stayed buoyant after a period dominated by three major Government energy floats and IPOs for the Fonterra Shareholders' Fund and Trade Me.
UBS head of corporate client solutions, Christopher Simcock, says the mixed ownership model (MOM) programme - which saw the Government sell down its shares in the energy companies to a 51 per cent holding - was well received.
"People can look back on the MOM process as a positive programme. The performance of Genesis has been good; the other two (Meridian Energy and Mighty River Power) have been mixed.
"Importantly, it put the international spotlight on New Zealand."
UBS executive director of investment banking Andrew Fredericks adds that valuations are higher and the economic background has improved. But it's more than that - "international interest and involvement in our stock market has increased."
Fredericks says however that investors find the current high valuations challenging.
"This isn't just a local phenomenon - valuations are high globally. That's driven partly by liquidity. The New Zealand experience is a little different because we still trade at a discount to the major indices.
"Yet the underlying strength of the market here has improved materially in the past five years. We can look back to things like the Fonterra IPO and the Trade Me IPO which galvanised international investor attention in the MOM process. This also assisted with retail participation."
Conditions are buoyant but the UBS executives reckon New Zealand companies could be doing more to take advantage of record low interest rates and record high dollar to spearhead transformational growth through acquisition or investment.
"The most noticeable thing is they are not going and buying businesses in Australia," says Simcock.
"The Australian private equity community has recently raised a lot of funds and has a mandate to invest in New Zealand. Global players are also looking here. There's a new sense of urgency to invest in New Zealand."
After years of playing second fiddle to Australia, Fredericks says, although there's a feeling New Zealand could wane a little, the two economies are now finely balanced. "The recent falls in the milk price are of concern, so is the lack of tailwind from the Christchurch rebuild. Pockets of the Australian economy are going very well. On the other hand Australia has recently stepped down its interest rates.
The underlying strength of the market here has improved materially in the last five years.
"Because Australia has had 20 years of economic expansion it now face challenges. The Australian labour markets are less flexible than in New Zealand and the governments are more bureaucratic. The cost of doing business in Australia is very high relative to New Zealand and that's an advantage for us. This is broadly recognised by multinationals."
Fredericks says an example of how this works was when Heinz moved some production out of Australia to New Zealand. This was because the cost of doing business here is significantly lower than Australia.
Fredericks attributes New Zealand's positive investment reputation to an economy and government that has been able to differentiate itself from the problems facing the rest of the world.
"We have a stable government that's perceived as being supportive of business and an economy that is, in part, driven by soft commodities. That's been able to grow while the rest of the Western world has been sluggish. It's our time to shine."
Though UBS is positive about New Zealand's prospects, there are risks - not least the high valuations. As Simcock points out: "The NZX is trading at such full valuations and at levels that are higher than Australia's ASX."
There are also external risks. Fredericks says the US Federal Reserve and the international interest policy decision-makers will move in the near term. That could create a lot of volatility, which in turn will lead to nervousness among investors.
"We see institutional investors are holding record amounts of cash to protect themselves against volatility. They are still open to new ideas that can generate returns. We're probably moving towards the top of the cycle."
Internationally, such factors should set the scene for a round of mergers and acquisitions as companies look to add assets as a way of growing. "You have to look at who is buying who and what opportunities are available," says Fredericks. "New Zealand is a small market. It has always been challenging to get the large multinationals to come here to invest because it is unlikely to be a strategic priority."
That said, UBS says there has been a boost to M&A activity here, much of it is strategic with a focus from China and Asia on soft commodity and agricultural businesses. More traditional investors from the US, UK and Australia are focused on more developed industries.