NZX boss urges caution after Singapore's offer

NZX chief executive Mark Weldon. Photo / Mark Mitchell

NZX chief executive Mark Weldon has warned New Zealand listed companies not to jump ship to the Australian stock exchange but has not ruled out a potential merger with the ASX and its takeover bidder the Singapore stock exchange.

The SGX revealed plans for an A$8.4 billion ($11 billion) offer for the ASX on Monday which would see the two companies merged into one corporate to create the fifth largest stock exchange in the world.

The move, which must still get approval from the Australian Government, has sparked concerns that it could marginalise the New Zealand market and make it more attractive for locally listed companies to move to Australia.

But Weldon said companies should not rush into making any decision and should ask themselves what New Zealand's corporate landscape would look like without an exchange at all.

"If we were to have no exchange there would be very few analysts in New Zealand, very few bankers or investment banks, it would be very much a service with a shuttle based out of Sydney."

Weldon said it would also likely mean the companies would need to move their headquarters to Australia to be close to where the capital was likely to be raised.

"You've got to ask the question - why would anyone listed in Australia keep their head office in New Zealand?"

Weldon said research had shown that for small New Zealand companies raising capital, spreads and liquidity were cheaper on the NZX compared to the ASX.

Weldon said the Singapore takeover bid for the ASX clearly changed the landscape for the NZX.

"It creates some threats and opportunities. We just have to work through those from both a shareholder and a stakeholder perspective."

Weldon did not rule out consolidation with the ASX/SGX in the future but said the NZX would be reassessing its strategy and structure in light of the merger deal.

Forsyth Barr analyst Guy Hallwright said it was hard to know what the deal might mean for the NZX.

"Really we have been sitting next door to a bigger, more efficient stock exchange for some time. Probably it doesn't make too much difference."

Hallwright said NZX's price rise yesterday showed some investors believed it would result in the NZX becoming part of the ASX-SGX. Shares in the company closed up 4c on $1.59 yesterday.

But he believed a merger was unlikely.

While New Zealand looked to Australia to grow Australia was looking to Asia and would not gain much from merging with the NZX, he said.

Meanwhile, New Zealand's dual-listed corporates had a mixed reaction to the ASX-SGX merger proposal.

A spokesman for Auckland International Airport said it didn't see any significant change.

"While you do get some upside in broadened exposure you do get some downside of becoming a smaller fish in a bigger pool which would cancel each other out."

Fletcher Building's head of investor relations Philip King said it would not change its decision to stay listed in New Zealand.

"Our attitude is unchanged, New Zealand is important to us."

Sky City Entertainment chief executive Nigel Morrison said it could help open up Sky City to more Asian investors but it had no plans to give up its New Zealand primary listing.