New broom sweeps up

By ELLEN READ

The Stock Exchange will abolish the New Capital Market and withdraw support for the unlisted board under proposals revealed by chief executive Mark Weldon yesterday.

After a high-profile launch in March 2000, the New Capital Market has consistently disappointed investors and participants amid complaints of expense and cumbersome administration.

"The New Capital Market structure does not make sense. It's not working. And the unlisted market is not something which, going forward, we should facilitate," Weldon said.

When he took up the position last month, he said a market review would be one of his first tasks.

A proposed new index - dubbed the junior board - would replace the 62 unlisted board stocks and 10 companies on the NCM.

Given the present values of companies on the NCM ($300 million) and unlisted board ($20 million), the new index could have a market value of about $320million.

Weldon said requirements for listing on the junior board were being drafted this week but would obviously include criteria for firms stepping up to the main board.

He wanted the new index to be launched as soon as possible, but that would depend on consultation with companies and market players, and on the official processes.

The act governing the NCM expired next March, so ideally something would be sorted before then.

Any new index aimed at startup companies would need to be structured to protect investors, ensure transparency and information disclosure and have good governance, he said.

The market review aims to revive investor confidence in the stockmarket which has not performed well for many years.

The Stock Exchange has 130 fully listed stocks and a market value of $44.3 billion, down from $52 billion in July 1999. Since the 1987 crash, the local market has plunged 59 per cent in US dollar terms, according to Bloomberg analytics.

Telecom accounts for about a fifth of the market by value. The next four biggest stocks - Carter Holt Harvey (the biggest forester), Contact Energy (the biggest energy company), Warehouse Group (the biggest retailer) and Air New Zealand - make up another fifth.

Luring more capital would be welcomed by companies such as closely held Seaworks, a contractor that lays undersea cables and inspects oil rigs and is considering selling shares to expand.

The exchange "has got to be bigger, so you need more stuff trading", said Bill Day, who founded Seaworks.

In the first six months of this year, the NZSE-40 gross index gained 3.78 per cent, supported by a strong economy and appreciating currency; the NCM fell 11.07 per cent.

In the latest financial reporting period, Mowbray Collectables was the only profitable NCM company and even it failed to achieve its target - it reported a net profit of $37,000, compared with a forecast of $136,000 for the year to March.

The unlisted board is also treated warily by investors after the collapse of stocks such as investment group Wilson Neill, which was heavily criticised for lack of disclosure.