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Govt May Be Asked To Fund Research On Small Listed Companies

Fuseworks Media
Fuseworks Media

Wellington, Aug 6 NZPA - The Government may be asked to fund research by analysts into small companies in a bid to improve capital markets in New Zealand.

The idea is an option in a draft report commissioned by the Capital Market Development Taskforce.

The taskforce revealed this week that no analyst research is available on 42 percent of companies listed on the NZX and a further 13 percent of NZX companies only had one or two analysts covering them.

"We are currently investigating whether there may be a case for government to encourage research on small quoted companies in New Zealand," the taskforce said in a progress report this week.

It has commissioned a report on the research market in New Zealand from Esperance Capital, a company associated with analyst Bruce McKay and others.

Taskforce chairman Rob Cameron said the report was looking at a number of funding models for small company research, including a research incentive scheme in Singapore.

Research on companies was important for informing investors and for improving liquidity in markets, he said.

Small issuers in New Zealand were reluctant to bear the full cost of research into them.

Singapore Exchange Ltd established its Research Incentive Scheme in 2003, according to its website. Under the scheme participants are covered regularly by at least two analysts and the reports are available free of charge on the exchange's website.

The scheme currently encompasses 93 listed companies and seven research firms.

"Research on smaller companies is of variable quality and not readily accessible to all potential investors," the taskforce said.

Other markets had this problem but it may be acute in New Zealand where listed companies were on average smaller than in overseas markets.

Traded volume is lower for small companies, making it uneconomic for the broking industry to research them.

The taskforce members include Rob Cameron, Franceska Banga, Jonathan Ling, Rob McLeod, Gareth Morgan, Adrian Orr, Cathy Quinn, Scott St John, Mark Weldon, Nigel Williams and Mary Holm.

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