Kiwi sharemarket ownership rises

One factor driving falling levels of overseas ownership included the de-listing of large stocks over the years, which were popular with foreign investors. Photo / Brett Phibbs

Exit of big stocks and KiwiSaver’s rise factors in foreign ownership fall but level still relatively high, says expert.

New research shows foreign ownership of the New Zealand sharemarket continued to fall this year, with total overseas holdings slipping to 32.6 per cent.

That's down from 33 per cent in 2014 and 44.3 per cent in 2005, according to investment firm JBWere's Foreign Ownership Survey, which canvassed 74 firms accounting for 97 per cent of the NZX's market capitalisation. JBWere strategist Bernard Doyle said overseas ownership, which reached 60 per cent in the mid 1990s, had returned to a more "healthy level".

One factor driving falling levels of overseas ownership included the de-listing of large stocks over the years, which were popular with foreign investors, such as Carter Holt Harvey, he said.

Another contributor was the rise of domestic investors as a result of KiwiSaver and the growth of the New Zealand Superannuation Fund.

JBWere noted that New Zealand's foreign ownership levels remained high compared with international peers.

Overseas investors held only 12 per cent of the United States' market, Doyle said.

"That's testament to the size of their economy and the fact that [the US has] a very vibrant domestic investment culture."

The report said changes in strategic stakes (holdings over 10 per cent) had a big influence on foreign ownership levels in New Zealand this year.

Almost 5 per cent of total foreign ownership was held through strategic stakes, down from 7.3 per cent in 2014, primarily as a result of the exit Australia's Origin Energy made from its majority shareholding in Contact Energy this year, JBWere said.

The report said Z Energy's overseas ownership increased from 33 per cent to 56 per cent following Infratil and the Super Fund's transfer of their shares in the petrol station operator to "a more offshore-orientated investor base".

Other firms that saw large increases in foreign ownership were SkyCity (up 18 per cent), Air New Zealand (up 16 per cent) and Nuplex (up 10 per cent), according to JBWere.

The survey also found New Zealand retail investor ownership was continuing to increase, to 26.9 per cent of the market from 26.4 per cent in 2014.

This reflected the "flow-on benefit" of the floats of state-owned firms such as Meridian Energy and Mighty River Power. "Whilst 2015 has seen a lack of retail-friendly IPO [initial public offering] activity, the large number of bond maturities during the year has helped underpin retail interest in the equity market," the report said.

The holdings of New Zealand managed funds also increased slightly, to 22.4 per cent of the market from 22.1 per cent last year.

Doyle said a positive development was the rise in the local market's capitalisation as a share of New Zealand's GDP to 41 per cent from 25 per cent in 2012.

"We had some real concerns in the past that the level was getting down to a peer group with emerging economies that had only recently begun investing," he said. "What we've always felt is around 50 per cent [of GDP] is really a minimum to have a sharemarket that is self-sustaining and can support a good, vibrant funds management and broker community."

Looking ahead, JBWere's New Zealand equity manager, Rickey Ward, said investment banks were working on a solid pipeline of potential initial public offerings and a higher number of deals could be on the cards next year following a lacklustre 2015.

Only two IPOs - Fliway Group and CBL Insurance - have taken place so far this year, down from 12 in 2014. The total will be three after AFT Pharmaceuticals lists next week.