LOUIS PIERARD The woes of New Zealand's third-largest listed company illustrate an issue that has been bubbling under for a decade. Fletcher Building is weighing the benefits of shifting its head office to Australia - a move that would add to a raft of major departures from the New Zealand exchange. Local investorshave lamented that Fletcher Building trades well below Australian peers that it consistently outperforms. Fletcher Building is valued at about 6.43 times this year's forecast trading profit. This compares with Australian rivals Adelaide Brighton and Boral that trade at 8.66 and 8.53 times respectively. Investors have attributed the discount to a mixture of factors including overseas investors' perceptions, the cost of capital here and tax considerations. A shift to Australia may correct those problems and stimulate interest and demand for shares. If Fletcher Building was listed on the ASX, it could be included in benchmark indices such as the ASX 200. Such a move would force Australian index trackers to include the share in their portfolio. Residence in Australia might also make it easier for the company to pass tax credits on to an Australian shareholder base, making the shares more attractive there. But the issue is bigger than shareholder rules. With most major businesses in New Zealand being owned offshore, New Zealand is becoming marginalised. Kiwi institutions have been left behind by the globalisation of businesses and investors' portfolios. Part of the problem is that politicians still think they can regulate the business sector's every action with taxation and regulation. Yet multi-national businesses flow across borders with ease. If a country attempts to be too clever with its withholding tax, stock exchange rules or has excessively high interest rates, then companies will simply do their trading elsewhere. The balance of power has shifted from government departments to boardrooms, and the sooner politicians grasp that fact and work to assist businesses, not use them as cash cows, then the sooner New Zealand's economy will benefit. The first step would be to sit down with company leaders and NZX executives to see what could be done to the present system to negate the need for our third biggest company to carry through its plan to relocate across the Tasman.
