NZX warned prices being led by ASX with more dual-lists

New Zealand firms listed on the Australian exchange often get better prices there. Picture / Australian Financial Review

An academic says New Zealand's local stock exchange needs to step up its game because the share price for dual-listed New Zealand companies is increasingly being led by the Australian stock market.

Last week the Australian Securities Exchange visited New Zealand for the fifth time in six months amid a raft of large New Zealand companies choosing to list on both the NZX and the ASX.

Bart Frijns, a finance professor at AUT University, said research he had done between 2002 and 2012 found the percentage of time the price for dual-listed New Zealand companies moved first on the ASX had jumped from 15 per cent in 2002 to 50 per cent last year.

"The ASX is becoming a more important market in terms of price. It is a concern. If the price discovery is better on the foreign market why would people still trade on the local market?"

Frijns said it was a problem that Canada also faced as many of its companies choose to dual-list on the United States stock exchanges.

"If that trend continued, why would people still trade their assets on the New Zealand exchange? It is a matter of stepping up the game and making sure the NZX is competitive."

Frijns' research found the issue was more pronounced for New Zealand's biggest listed companies. In 2001, 87 per cent of Fletcher Building's price discovery came from the NZX. Last year that had shrunk to just 21 per cent.

For Telecom it was even higher, shrinking from 87 per cent in 1998 to 9 per cent in 2012.

Telecom, Fletcher Building and Trade Me are the most traded New Zealand companies on the ASX this year.

Smaller dual-listed New Zealand companies such as New Zealand Oil and Gas were still New Zealand dominated, although its price discovery had slipped from 88 per cent in 1998 to 69 per cent last year.

Frijns said New Zealand needed to maintain its local exchange because it was important to have a place for new companies and start-ups to list.

But it needed to become more competitive.

"I don't think you can stop companies dual-listing. This is competition between the exchanges."

On Wednesday, NZX boss Tim Bennett said he was not concerned about the ASX coming down to New Zealand and that on average 90 per cent of the trades for dual-listed companies still came via the local exchange.

"What we find is that unless you are large or have an Australian business, like Kathmandu, you actually don't get a lot of interest from brokers and don't get a lot of liquidity. They are certainly not taking a lot of liquidity from us."