KEY POINTS:
The Capital Market Development Taskforce announced this week by Commerce Minister Lianne Dalziel should take a hard look at regulation and how investors can be provided with a greater sense of security.
It remains to be seen whether the taskforce will spark the constructive "national conversation" that NZX
chief executive and taskforce member Mark Weldon is hoping for.
There is already a pretty widespread national conversation about the capital market, comprising finance companies and their debentures, and it's not a very positive one.
It's likely that many of those with cash tied up in gutshot finance companies chose to invest in them because they remembered the 1987 crash and didn't feel safe investing in shares.
The Feltex debacle which, like the finance company problems, mostly hit retail investors, will have also undermined their confidence in the sharemarket.
KiwiSaver sidesteps some of those fears. It's safe to assume many who are now signed up, whether deliberately or as a result of the inertia the scheme cunningly relies on, don't even know they're investing in shares.
A local market watcher at one of the big investment banks believes whether they take an active interest or not, New Zealanders will feel a lot more comfortable about the sharemarket if they believe it is well regulated. In particular, the taskforce should be taking a good hard look at the regulation of fund managers, who are going to end up with so much of New Zealanders' money within a few years.
As Stock Takes has noted, some commentators say what amounts to market manipulation by fund managers continues to happen on the New Zealand market. The market watcher is concerned the lack of standards for portfolio managers is creating the potential for a future finance company sector-style meltdown.
The need for tougher regulation of the sector was recognised quite a few years ago, yet was implemented far too slowly to prevent big losses for investors.
With so many hopes pinned to KiwiSaver by the Government, capital market professionals, and investors themselves, this is surely an area we need to get right.
Given the taskforce's pedigree, particularly that of chairman Rob Cameron, it seems inevitable that at least the partial float of state-owned enterprises will feature in the blueprint or action plan it will come up with.
However, the presence of Gareth Morgan, a long time critic of sharp practices in the funds management industry, should give some hope that investor protection measures that will inspire confidence in the market will receive some attention.
ABN MOVES
Commonwealth Bank of Australia this week confirmed it was in the final stages of negotiating the purchase of ABN Amro's Australasian operations, including its New Zealand wholesale corporate and investment banking operations and Tauranga-based retail joint venture ABN Amro Craigs.
As reported in Stock Takes a couple of weeks ago, at least some broking industry figures expect the transaction, should it go ahead, to spark consolidation in the sector. CBA, which also owns ASB Securities, is unlikely to want two retail broking operations, they reason.
Others believe that ASB Securities, which is more focused on online services, and ABN Amro Craigs, which has a more traditional model, are sufficiently distinct to co-exist under CBA ownership. Either way it will likely be some time after the completion of the transaction before ABN Amro's local staff know which way the cookie will crumble.
For some indication they'll be keeping an eye on Australia, where the situation is similar, albeit on a larger scale. CBA has an existing online brokerage, Commonwealth Securities or CommSec, while ABN Amro has its wholesale corporate and investment banking operation and its ABN Amro Morgan joint venture retail business.
EXPORT GOLD
Yesterday's Reserve Bank interest rate cut should be good news for exporters. The cut and market expectations of more to come should send the kiwi lower at long last, boosting export receipts for companies such as Fisher & Paykel Healthcare.
Analysts at Aspect Huntley met F&P Healthcare's management to discuss various issues - its slew of new products and the prospects for growth in the US which is the main market for the company's obstructive sleep apnoea and respiratory care offerings.
Aspect Huntley obviously came away impressed, saying it expected the company to deliver solid double digit bottom line growth. But that was without factoring in any weakening of the New Zealand dollar against the greenback.
In a research note published a couple of days before yesterday's RBNZ decision, Aspect Huntley said rate cuts would further benefit the company's earnings, and it has upgraded its rating on the stock to "Accumulate" and increased its fair value estimate to $2.95.
F&P Healthcare shares jumped 16c to $2.62 yesterday following the rate cut.
Among other exporters, sister company F&P Appliances was up 11c to $2.11, Sanford was up 18c to $5.38 and Rakon was up 16c to $2.75.
OIL FALL SPARKS CHANGE IN FORTUNES
A week can be a long time for oil-reliant stocks.
With prices tumbling from a seemingly inevitable march to US$150 a barrel last week to below US$125 yesterday, some sentiment is rubbing off on New Zealand Oil & Gas.
In that time it also announced it had struck out at the offshore Taranaki Momoho 1 exploration well, in which it had a 15 per cent stake worth around $8 million.
Plugging the well was completed yesterday and the drilling rig is to move on the Todd Energy and OMV Maari field in the next few days.
Forsyth Barr's Andrew Harvey-Green said that because the underlying value of NZOG would bounce around with oil prices, there was no doubt the slide over the last week had affected sentiment.
The failure of Momoho had also affected the company but not to the same degree it would have attracted investors if the well had been successful.
NZOG's price has slipped from $1.66 a week ago to $1.51 yesterday.
On the flip side, the performance of heavy oil users has been buoyed. Air New Zealand uses about nine million barrels a year and its share price has risen from $1.11 to $1.28 in the past seven days. Like other export stocks it also benefited from yesterday's drop in the kiwi.
CUSTOMER SWITCHING UNLIKELY TO HURT CONTACT OR TRUSTPOWER
An analysis of power sector data shows Contact Energy and TrustPower face a small risk from increased competition and consumer switching.
Goldman Sachs JBWere forecasts some decline in market share for the two listed companies, which have higher tariffs than state-owned enterprises.
The analysis of the Electricity Commission's market review concludes there were no proposals to change the industry structure and the risk of regulatory intervention remains relatively low.
One area identified as a way to increase competition is encouraging increased power switching, which could have an impact on those with higher charges. However, rates of switching companies are low.
"It is important not to overemphasise the negative risk. Consumer inertia is inherent in retail electricity markets globally. We do recognise that the increased economic pressure on consumers in the current environment may promote greater switching."
The commission says domestic customers could save up to $150 a year by switching suppliers.
Apathy towards tariff variations was highlighted by TrustPower's consistent top ranking in customer satisfaction surveys despite charging the highest prices, the note says.
New Zealand ranked seventh out of 31 countries in a survey measuring switching, but the rate was still just between 5 and 15 per cent.
TrustPower has warned that low hydro lakes would hurt its profit outlook. Retail tariffs are expected to increase to reflect increased costs of generation due to carbon charging, the cost of renewable investment, the declining economics of incremental wind sites and rising gas prices, the Goldman Sachs JBWere note says.
Contact shares closed up 33c yesterday at $8.47. TrustPower shares closed up 6c at $7.60.
- Grant Bradley
