Capital-raising picks up pace

While the sharemarket is in a flat patch with little immediate prospect of forward momentum, the NZDX debt market is on track to raise a record amount of capital this year.

Furthermore, trading data suggests retail investors are increasingly looking to the market, seeking steady returns and lower risk than other forms of fixed income products such as finance company debentures.

Last week saw the thick end of $500 million worth of new debt securities listed on the market.

Macquarie's $121 million commodity bond issue listed on Thursday and the ANZ National Bank issued $350 million of debt securities on Friday.

Last week's issues took the total capital raised on the NZDX so far this year to $1.89 billion, well up on the same period last year.

NZX markets head Geoff Brown expects issuance to continue at strong levels for the rest of the year and easily reach last year's record level of more than $2 billion.

While the market tends to be dominated by large institutional investors buying big chunks of corporate debt to hold until maturity, trading figures suggest retail investors are increasingly favouring listed debt securities and trading them as well.

By the end of August, there had been 20,874 trades against last year's 17,628 over the same period.

"Certainly, there has been an increase in the number of trades and an increase in the underlying liquidity," said Brown.

Retail investors tended to be yield focused and favoured property and fixed-interest investments, such as finance company debentures, far more than shares. But those investors might now be seeking additional security.

"What we're probably seeing, as a consequence of some of the failures in the unlisted finance company sector, is a considerable amount more interest in the listed sector and, in particular, those securities that are rated."

Fundsource research manager Binu Paul said there had been "a huge trend in investor preference" towards high-yield, fixed-income investments in recent years.

That trend was set to continue as baby boomers reaching retirement sought relatively secure but lucrative investments.

But he also noted that most of the corporate bond issues during the past decade or so had tended to favour wholesale investors rather than "mum and dad" retail investors.

"Which is also why a lot of finance company debentures came into the market trying to fill that gap."

Now fund managers were offering "a whole lot more of high-yielding, fixed-income flavoured products, simply to cater to that demand".

Macquarie's commodity bonds were an example. The investment bank marketed the bonds, which pay 8.25 per cent a year and carry a AA-minus credit rating, as an alternative to finance company debentures.

NZDX Debt Market

* Listed corporate debt: $8 billion

* Government debt: $28 billion

* Raised this year: $1.89 billion