Some good points on the board

By BRUCE SHEPPARD*

To try to give the New Zealand Stock Exchange a score out of 10 for performance over the past six months would be unfair, both to the exchange and to any sensible commentator on it.

There is no doubt that, over the past 10 years, the NZSE deserves and should receive a score of 1 or less out of 10 for its performance.

The NZSE has presided over:

* Huge shareholder wealth destruction (BIL, Fletchers, Air New Zealand).

* Generally poor supervision and a propensity to give companies what they want, more often than not (8 out of 10 waiver requests granted).

* Negligible new listings, and the total number of listings remaining constant or falling.

* Significant corporate migration, for example Nufarm, Lion Nathan.

* Inequitable and poorly managed takeovers that have ensured that effective control of many of New Zealand's companies has passed into the hands of strategic shareholders, predominantly overseas.

* Shrinking local ownership of our means of production - our public companies have become increasingly overseas owned.

* A continuing and accelerating move of local investors from equity into housing.

But the last six months are a different story.

The NZSE-40 index has been a flat line and, while a flat line graph is usually a dead patient, a dead patient is better than a buried patient, as is the case with most overseas markets.

To top off the relative success of our market (in not destroying value, for a change), the NZSE has presided over:

* No major adverse corporate surprises.

* Improving supervision.

* The occasional small initial public offering that gets away fully subscribed.

* Adequately supervised and informed takeover activity.

* A stabilising local ownership of our exchange.

* No significant corporate migration.

So just as the Wild West was tamed by maturity, time and committed gun-slinging law makers and enforcers, so it is with the NZSE. Let's give it a 7.

But the real judgment call is to score the NZSE's promise for the future.

It is fair to say that the prospects for the exchange have more high hopes, with less prayer required for good measure.

The positives:

* A new CEO, young, energetic and a visionary for good measure, committed to restoring confidence in the New Zealand market, thereby driving local ownership and investment opportunities.

* The surveillance panel has started to think about waiver requirements in more detail, and use its teeth. A good omen.

* The occasional new listing on the horizon, some of which may spark some interest. Let's see what Vertex - the "household name that nobody knows" - does, as compared with Skellmax and its baggage.

* Generally, our companies have brought to book their mistakes from the past.

The prospects of large corporate losses, such as Fletchers, Natural Gas and Air New Zealand, are unlikely to be repeated, unless Telecom chooses to write down its investment in AAPT.

So, new enthusiastic leadership, combined with a sound and stable platform, suggests that we can hope for a score of 8+ out of 10 over the next 12 months.

* Bruce Sheppard is chairman of the New Zealand Shareholders Association.