NZX chief Mark Weldon says he won't rule out consolidation of the New Zealand Stock Exchange as it faces the prospect of a larger competitor across the Tasman.But there was a spectrum of alternatives and lots of details yet to play before the proposed $A8
NZX chief Mark Weldon says he won’t rule out consolidation of the New Zealand Stock Exchange as it faces the prospect of a larger competitor across the Tasman.
But there was a spectrum of alternatives and lots of details yet to play before the proposed $A8.4 billion ($NZ11.1 billion) takeover of the Australian Securities Exchange (ASX) by the Singapore exchange (SGX) was a done deal.
“You need to assess shareholder and stakeholder interests and all I’d say is nothing is off the table,” Mr Weldon told NBR.
Mr Weldon said he did not know about SGX’s proposed offer before it was unveiled yesterday which, if successful, would create the fifth largest listed exchange operator in the world ahead of the Tokyo and Hong Kong stock exchanges, with annual revenue of more than $US1 billion.
There would be pros and cons in having a large competitor across the Tasman but it was too early to jump to a conclusion one way or the other, said Mr Weldon.
The media was often good at “turning corporate deals in to the final acts of a Shakespeare tragedy,” he said.
Yet there was still a lot of detail yet to be announced around the capital markets side of the proposed deal, including listing rules and what clearing house would be used, that were fundamental to weighing up the NZX’s ability to compete.
“There’s obviously a need to look at it carefully, consider what a changed landscape looks like and consider, in a measured way, what the threats and opportunities are from a shareholder and stakeholder perspective and keep a very open mind,” he said.
In many cases, bigger was not better in terms of the size of the exchange and there was already plenty of concern among New Zealand companies that the regulatory cost to list on global platforms tended to be very high, he said.
“One thing that’s for sure is when an organisation gets bigger, more bureaucratic and more politicised, and its cost structure goes up, including for customers.
“The Capital Markets Task Force last year showed liquidity on the NZX for small cap stocks – under $500 million or so – was better on the NZX than the ASX. The economics of running an exchange are all about the big caps, not the small caps, but you would imagine a lot of the small caps would continue to languish in Australia and who knows where there are opportunities, but that’s our job to figure out the threats and the opportunities,” he said.
Mr Weldon said he saw the future of the NZX as “specialist” rather than niche, focussing on small to medium-sized enterprises (SMEs) and agricultural companies.
“We would look to build a market that is better suited to SMEs and one that has a lower cost structure, again, to the ones right now which, by the way are a lot lower than ASX and Singapore.
“I think we can do well in that area and around agriculture – an area of specialisation that has a very global opportunity around it that would be good for the corporate sector in New Zealand.”
Shares in the NZX have risen 4c today to $1.59.
Mr Weldon said her was not aware of any takeover on the horizon for the NZX.
“But we will continue to carefully assess our options and shareholder and stakeholder interests.”
