Capital Markets report: There's a lot of cash out there, says NZX chief Mark Peterson

NZX chief Mark Peterson

As NZX chief executive Mark Peterson sees it, the financial markets are helping companies adapt their balance sheets to the new reality in a post-Covid world.

The S&P/NZX 50 Index is only a few hundred points off its record high and well off its March low of 8948, when Covid-driven market panic was at its worst. Since then a string of high profile capital raisings have been well-supported and comfortably absorbed by the market.

"The financial markets are functioning well, even in these volatile times," Peterson says.
"There is a lot of cash out there to support strong businesses or businesses that have faltered as a result of the crisis.

"New Zealand investors want to support New Zealand companies.

"In addition, you have businesses raising capital to take advantage of opportunities that may become available further on down the track," he says.

Peterson said the importance of access to capital in times like these can not be underestimated.

"Businesses will be looking hard at their balance sheets and they will be thinking about funding and diversification of funding.

"That's where having access to capital and using the public markets has never been more important."

In the year to date, $5.89 billion in capital has been raised via the NZX's markets, up 61.6 per cent, year on year.

Of that number, $3.14 billion was in equity raisings, $1 billion was raised by investment funds, $1.2 billion in retail debt and $550m in wholesale debt.

Peterson says companies' ability to raise capital on the public markets offers a pathway of recovery for the economy as it struggles through the Covid-19 downturn.

"There has been a reliance on debt that has been there for some time, and people are realising that in times like these, that debt is sometimes not the right option, and that having access to equity is a really critical aspect."

Even though economies here and around the world face unparalleled uncertainty, there remains a huge appetite for new paper.

The largest to date in 2020 was Auckland Airport's $1.2 billion placement and retail share purchase plan, which was comfortably filled, despite the uncertainty and challenges facing aviation.

Peterson says that as Government support for some private companies rolls off, there might be more interest shown in raising funds.

Will we see more capital raisings in the course of the year?

"I expect so."