Australia's gravitational pull is increasing

By DAVID McEWEN

The days of dual listings for New Zealand companies on the Australian Stock Exchange are numbered.

Faced with the ASX's tougher listing rules, they can either front up to doubled compliance costs through maintaining dual listings or opt for a sole listing on either rival exchange.

Unless foreign companies have a minimum A$2 billion ($2.43 billion) of net assets and A$200 million of profit after tax in each of the previous three years - they will not be able to get an exemption from Australian listing rules requirements under proposed changes. That goes for Australia's CER partner, too.

If the proposal goes into effect none of the 23 New Zealand companies listed across the Tasman will meet the proposed new foreign exempt rules. They'll have to seek full ASX listing, adding significantly to their compliance costs.

Despite its earlier failure to persuade local brokers to relinquish their grip on the New Zealand sharemarket, the Australians look likely to gain control here. The New Zealand exchange's plans to demutualise, becoming a listed company with a new board and chief executive are too little, too late.

Commerce Minister Paul Swain has stressed recent improvements to New Zealand's securities laws and market information disclosure requirements, sensing the ASX's proposals were being driven largely by concerns about holes in New Zealand's regulatory regime.

The ASX's timing is ironic. Finance Minister Michael Cullen and Australian Treasurer Peter Costello are proposing legal changes so New Zealanders or Australians can access tax credits from shares held in transtasman investments.

The New Zealand exchange is already struggling to compete with its Australian cousin or the Nasdaq. Major companies - Nufarm, Baycorp and Lion Nathan - have already voted by moving their primary listing to Australia.

At the end of 2001, 132 local companies were listed: less than half the number of 1986. It's tempting to blame the 1987 share market crash. In the same period, the ASX has seen the number of listed companies rise by 16 per cent to 1334. Since 1986, the main measure of the local market, now known as the NZSE40 Capital Index, went down in value by 46 per cent by the end of 2001, while the Australian All Ordinaries Index more than doubled.

Most New Zealand companies do not see the need to float - although at least six IPOs are in the pipeline. Businesspeople with the vision to expand offshore find it easier and cheaper to raise capital from international sources.

This trend has been exacerbated by the shift of local investment players to Australia, where New Zealand and its market tend to be treated as a retarded younger sibling.

Can a share market at the bottom of the world survive with 132 domestic companies, of which only a handful have internationally significant market capitalisations?

Does it deserve to survive?

A decade ago, an investor looking for safe, high-quality shares on the New Zealand market would probably have put their money into the 10 largest companies - the so-called blue chips.

In 1999, Fletcher Challenge, Air New Zealand and Brierley Investments, would have been the subject of buy orders. These companies between them have destroyed billions of dollars in shareholder wealth. The market's largest company then, as now, was Telecom - a company whose share price did well initially but is now trading at its mid-1994 level.

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