Flurry of new listings amid the doldrums

By ELLEN READ and PAUL PANCKHURST

The Stock Exchange hit its lowest point in 13 months yesterday, but the year looks like ending with a stampede - by recent standards - of new listings.

Paramount Property Trust listed yesterday (see right), bringing to four the number of new listings on the main board this year (the others were Skellmax, Turners Auctions and Vertex Group).

At the same time a new biotech company, Pacific Edge, announced its intention to list on the second board, which would double that market's tally for the year (the other was Straightedge).

And on top of all that, a new series of capital notes was launched, aimed at letting New Zealanders invest up to $100 million in global markets.

If that was the good news, the bad news was that the NZSE40 capital index closed yesterday at 1926.06, down 13.97 points and back in the same territory as last November.

The local market downturn is puzzling, as the economy is doing well and global markets are a long way off their low points of three to four months ago.

According to Jason Wong of First NZ Capital, to understand why the index is at a 13-month low, it pays to know a bit about betas.

New Zealand had, over the past year, or two been a "low beta" - or defensive - market for international investors, he said.

To the layperson, a low-beta market is less volatile than its high-beta cousin - less prone to sky highs and valley lows. That was attractive for investors with a reduced appetite for risk after the great falls on Wall St and around the world.

But international equity markets strengthened in October and November and, with appetites for risk returning, investors may be exiting New Zealand for bargains in other markets.

Another factor is the Telecom effect. The company, which has a 22 per cent weighting in the index, has seen its share price suffer after a profit warning on November 5 and a run of bad news.

Selling pressure from institutions raising money to buy into the planned Auckland International Airport share placement may have been another factor in market weakness.

And forecasts of an economic slow-down, with companies' earnings not expected to grow as strongly next year as this year, play a part in the bigger picture.

Then there's something the Stock Exchange would also highlight: the benchmark is not a gross index, and does not take dividends into account.

Wong pointed out that falling share prices had improved the yield of equities relative to bonds.

But the market's weakness has not deterred local sharebroker Forsyth Barr from establishing a new company, Global Equity Market Securities, to offer up to $100 million of Gems series 1 notes to the public.

The investment return on the $1 notes will be linked to the best-performing of three of the world's most significant sharemarkets - the S&P 500 Index, the Nikkei 225 Index and the FTSE 100 Index.

Note holders will get a return of 67 per cent of the highest index return of those three, plus their principal capital will be repaid when the notes mature in January 2008.

Forsyth Barr managing director Neil Paviour-Smith said these three markets were trading near their lowest levels for more than five years and the Gems notes provided investors with an innovative way of investing in these markets, with the comfort of the capital protection.

The notes also provided exposure to all three markets, removing the need for investors to select which they thought would perform best.

Paviour-Smith declined to predict the state of global equity markets five years out but said that looking at five-year returns over a 20-year period, a 67 per cent return line did not fall below zero once.

"Over the last 20 years there's always been an index which has performed pretty well and that's over a couple of economic cycles," he said.

The notes, which are planned as the first in a series of financial and sharemarket products, will be the first type of capital-protected, equity-index-linked security to be listed on the New Zealand Stock Exchange. There is an active market for this type of security overseas, particularly in Britain.

A listing date of December 23 has been set, meaning investors will be able to trade the notes and need not hold them until maturity.

Paviour-Smith said Gems were targeted at investors looking to gain exposure to these key overseas equity markets in a simple and efficient manner, but who also wanted downside protection, no currency exposure, a locally traded security and did not wish to have to select which market would perform best.

Interest so far this week had been strong, he said.

The new second-board listing, Dunedin-based Pacific Edge Biotechnology, is based on work by Otago University scientists, using genetic identification to develop early detection techniques for cancer. Company executives are touring the country promoting the company's $3 million share issue, ahead of a Stock Exchange listing on December 20.

It is offering 12 million shares in a float organised by sharebroker Forsyth Barr. This will give new investors a 20 per cent stake.

Funds raised in two instalments, 15 cents a share on application and 10 cents by September 30 next year, will finance development for the next three years, until the expected commercialisation of products.