KEY POINTS:
As the global financial crisis lurched from dire to near-apocalyptic in the last quarter of last year, sharemarket boss Mark Weldon helped to wrest at least a modicum of media, public and political attention away from the general election and towards the gathering threat to our economy.
Weldon
and his company NZX are at the sharp end of the crisis which has, among other things, further reduced the local equity market's share of the overall economy to its lowest level in a couple of decades.
Even before the credit crunch, if you were to liken the big bourses of New York, London, Frankfurt, Tokyo or even Sydney to large supermarkets, our own NZX was more like a suburban corner dairy.
The crisis threatens to relegate it to the relative status of a roadside lemonade stand.
Yet despite the marginalisation of his company and its operation, Weldon has, at times, led the national discussion about how the country can best respond to the crisis.
Aside from last year's "Swan Dive or Belly Flop" paper co-authored with the New Zealand Institute's David Skilling, Weldon was just this week appointed chairman of the National Government's Jobs Summit set for next month.
Also this week, he gained front-page coverage with his call for company directors to get rid of chief executives who couldn't deliver the goods during tough economic times.
Even if, as the more cynical may suggest, the call was a mere sop to the unions who will also be represented at the summit, and whose members are likely to be among the hardest hit in the tough times to come, it was at least a deft one.
Weldon, whose earnest efforts to establish himself as a national figure have at times been undermined by his predilection for management consultancy jargon and tortuous syntax, appears to be learning a thing or two about connecting with the public.
In charge at NZX for six years now, Weldon says 2008 was the hardest yet "in the sense that there was pain involved for a lot of people".
"You can remain optimistic about the future but you'd have to be pretty insensitive to be happy about those types of outcomes. This has been a grim economic environment."
That said, and in spite of the benchmark NZX-50's 30 per cent fall, Weldon says the market has been largely free from some of the "shenanigans" that occurred elsewhere.
That includes the short selling that in some cases precipitated the demise of big, but in retrospect vulnerable, companies.
"Our market has reacted pretty maturely. That makes you feel reasonably good about the job that us, the Government, the Securities Commission and firms themselves have done over the last four to five years."
Indeed one of the hallmarks of Weldon's time at the exchange has been its move to diversify revenue streams to make it less dependent on merely clipping the ticket on sharemarket trades.
On his watch, NZX has, among other things, made more of its sales of market information, set up a funds management business, and taken tentative but bold steps towards setting up market platforms for trading carbon emissions rights and equities in Australia in competition with NZX's would-be suitor several years ago, the ASX.
This diversification, Weldon says, was "extremely conscious".
"I put together a view of what was the worst thing that could happen, imagined it could last for three years and thought about what we would need to be able to drive through.
"If we had run an ASX model which is 'let's manage costs down and assume liquidity will continue to grow', right now you would be saying, 'Mark, I think the financial viability of the exchange is at risk, how should that make investors feel?'
"As it is, financially, cash-flow wise, we are fine, we are more than fine, we're extremely healthy and that's always been the absolute point of buying these types of businesses.
"We've definitely structured the business so it's built for long-term growth and stability rather than any particular short-term outcome."
As for the market itself, Weldon exhibits the kind of optimism in the face of daunting prospects that the real estate industry specialises in.
"The first half of this year is going to be a tug-of-war between bad news and negative sentiment on one hand and low valuations and buying opportunities on the other. I think it will be an even competition."
There are signs that tentative bargain hunting is already happening on the NZX, he says.
"Equity markets, except for during the Great Depression, have always come back exactly halfway through the recession. We've been in recession for four quarters, you would think we're a little more than halfway through."
Even if, as he suggests, there is some light at the end of the tunnel, there are some significant challenges ahead and one of the bigger ones, he says, is the funding squeeze on businesses of all sizes.
In their "Swanbelly" paper, Weldon and Skilling have already suggested a number of responses to the funding squeeze on small to medium-sized businesses, but this week, Weldon highlighted problems for larger businesses.
"I don't think the public realise how short funding is for large corporates, it really is."
In his role as a member of the Capital Markets Taskforce, Weldon has been working on ways to streamline the process by which companies can raise additional capital from existing shareholders without the onerous requirements to produce a full prospectus and other documentation.
But there is a sector of the local economy which Weldon believes is particularly vulnerable to the funding squeeze thrown up by the credit crunch.
"You don't like to talk about it too much but one of the sectors most at risk is the co-operatives, because they don't have any liquidity in their shares at all."
He's talking about the farmer-owned co-operatives that dominate a number of agricultural sectors including, but not limited to, Fonterra.
"Many shareholders are heavily leveraged, having bought land on the basis of very high payout values.
"So if co-operatives are having trouble raising bank debt, it's pretty hard for them to find equity as farmers are not going to be forthcoming with millions of their own dollars at the moment."
Weldon says last year's failure to partly float Fonterra was "certainly a disappointment" but he refuses to be drawn on whether another tilt is likely.
"I don't know, but I think this financial crisis will make it more clear that the co-operative model is a risky one.
"If you can't get funding from banks and at the same time, farmer shareholders are cash strapped, actually the business gets risky."
A potential solution, and one that neatly dovetails with the National Government's proposal that the New Zealand Superannuation Fund should increase its local investment allocation, is for the fund to invest in new non-voting preferred redeemable equity issued by the co-operatives.
That would see the Super Fund get a good return for the taxpayer while filling a gap in the corporate landscape.
Weldon also sees the issue of non-voting stock as a means to get around a common objection to the partial sale and listing of state-owned enterprises, a move he says would benefit the entire economy but which would surely boost turnover on his company's markets.
He observes that the world and the local fiscal outlook has changed somewhat since the National Party said it would not sell any state-owned assets in its first term in government.
But with the fiscal position set to worsen dramatically since then and Standard & Poor's threatening to downgrade New Zealand's key credit rating, "they may be wishing they hadn't said that".
