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Partial Privatisation, State Funded Company Research Mooted

Fuseworks Media
Fuseworks Media

Wellington, Dec 16 NZPA - Partial privatisation of state assets, a new watchdog for capital markets and partial state funding of research on small companies are among the recommendations of the final report of Capital Markets Development Taskforce presented to Commerce Minister Simon Power today.

The taskforce, which has been working for 18 months, does not regard these ideas as radical, arguing that Air New Zealand is already majority state owned and listed on the share market and the model works well.

The taskforce does not suggest a level of partial privatisation but it has commissioned work on the issue and found it depends on the size of the company.

"For some 10 percent of existing equity would be enough, for others you need more," said taskforce chairman Rob Cameron.

"Air NZ have about 20 percent of their stock listed and it works."

The share of the economy held by state-owned enterprises in New Zealand was not hugely out of line with other countries but it was unusual that the assets were 100 percent state owned. In France, many state owned assets are partially owned.

The taskforce is addressing the issues of lack of depth in the local capital markets and a lack of trust in them, particularly among retail investors.

More than two thirds of Australia's top 200 countries are listed on their stock exchange, while in New Zealand around a third are listed.

"We are not going in saying the Government must privatise. We are saying there are opportunities here for government to participate in capital markets in a way that is probably good for the management of their assets and good for our capital markets development," Mr Cameron told reporters.

The taskforce also recommends that the Government play a role in increasing liquidity in the debt market by considering issuing longer dated bonds and government bonds targeted at retail investors.

It also recommends that New Zealand become an agricultural market hub, that Statistics NZ provide more information on capital markets, and that links between private and public markets be improved so small companies can be "dragged through" onto the exchange.

The idea that government and industry co-fund a system to provide independent research on small companies, growth stocks and new listings is also floated.

Such systems exist in other countries. The report does not detail a system but the authors believe it could cost about $1 million a year and the research work would be outsourced via a tender and monitored.

The taskforce has earlier said 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.

The taskforce also recommends that a new organisation be created to focus on market conduct, taking on functions of the Securities Commission, NZX, Ministry of Economic Development, Companies Office and government actuary. This would be a market conduct regulator for investments in securities market. It would be similar to the UK's Financial Services Authority minus prudential supervision, which would remain with the central bank.

The idea is to avoid uneven regulation being exploited by issuers.

"On the opportunities side is developing New Zealand as a hub for agricultural capital markets, products and commodities and even products that would help existing co-ops.

"To do that you have to have a lot of both internal and external information to the organisation and focus on the collection of that," Mr Cameron said.

"It is part of a bigger goal to improve the information environment around our capital markets generally," he said.

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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