PM to lead response to capital markets report next year

The Government is promising a quick response in the new year to a report recommending a range of moves to improve capital markets in New Zealand.

The report recommends partial privatisation of state assets and the Government response to this is to repeat its position on the issue.

Finance Minister Bill English said the Government has made its position clear -- no sale of any assets in this term, and if it changed its policy it would campaign on it.

Mr English said there were a range of important suggestions in the report relating to the lifting of investor confidence in the market and giving people more and better information.

The final report of Capital Markets Development Taskforce presented to Commerce Minister Simon Power today recommends a new watchdog for capital markets, partial state funding of research on small companies, that the Government play a role in increasing liquidity in the debt market and that New Zealand become an agricultural market hub.

While the Government dubbed much of the recent report by the 2025 Taskforce chaired by Don Brash as impractical, it promised to consider this report as a matter of priority.

Mr Power said the Government would look closely at some of the recommendations as part of a current review of the Securities Act.

"We expect to be able to detail early in the new year how it will be progressed," Mr Power said.

Prime Minister John Key would lead the response by announcing it early in 2010.

Mr English said lifting investor confidence was important because so many New Zealanders were burned by finance companies this recession.

Labour Party state-owned enterprises spokesman Clayton Cosgrove said Labour would not support partial privatisation of state assets. The taskforce could be used as a stalking force for privatising state owned assets.

Minister of Revenue Peter Dunne said tax was crucial to capital markets reform.

Business groups today welcomed the report.

The New Zealand Private Equity and Venture Capital Association said the report was a step in the right direction but also said that the taskforce had not picked up on some of its recommendations on tax.

Business New Zealand said New Zealanders would benefit from the partial listing of government and local government owned businesses to broaden the range of investment opportunities available.

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."

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 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.