NZX wants 'intellectual honesty' from SOE policy opponents

NZX chairman Andrew Harmos has called for "intellectual honesty" from opponents of the government's proposed mixed ownership model for state owned enterprises.

The policy would offer investment options to savers, and allow the SOE's to have access to capital for growth from shareholders, while the government retained control, Mr Harmos told the NZX annual meeting today.

"If only opponents of this could have the intellectual honesty to recognise that it is a policy that has no losers," he said.

"Emotive terms -- such as 'asset sell off' are not accurate and mischievous."

Commenting on NZX's performance, he said the company had performed strongly last year and was half way through an even stronger 2011.

The domestic macro environment was as favourable to NZX as he could remember it being, Mr Harmos said.

Business development and major capital initiatives of the past few years, including launches of a clearing house and a dairy derivatives platform, were delivering cash flows and earnings growth.

NZX was still seen as closely correlated to the cash equities market and its order flows but, while that business was fundamental to the company, NZX was less reliant on it than ever before.

Mr Harmos took issue with companies that took "an unnecessary swipe" at either NZX or New Zealand's capital markets generally when deciding to list on overseas markets.

NZX ran a highly efficient cost effective infrastructure and information market for listed securities. If an initial public offering did not sell well or did not proceed to listing, that was almost always because investors or brokers felt it was over-priced, an unproven business model, unduly speculative, the numbers or prospects did not stack up or it was unappealing for some other reason, Mr Harmos said.

"This is not a failing of NZX nor in many cases of the capital market."

No shortage of investment capital was available in this country for products, particularly of good quality, that were fairly priced.

Investors bought quality companies wherever they were listed. Australian investors would buy quality New Zealand companies on NZX, and they would not buy poor quality companies just because they were listed on the ASX.

"Small to medium listed companies that are relevant to investors and analysts here are less likely to be relevant in the larger pool that is Australia and no more likely to enjoy research coverage or sustained, if any, attention," Mr Harmos said.

"It makes sense to have a listing where a company's investors are, where its business is primarily located, where its brands are recognised and importantly, where it's relevant to the local community."

Referring to "merger mania" among some overseas exchanges, Mr Harmos said it had been driven by the need to build more and more scale at lower and lower cost with faster and more expensive technology to enable the cash equities business to remain profitable.

If NZX relied solely on its cash equities business, it would face many of those challenges, but NZX's strategy was to build businesses where New Zealand had an international competitive advantage and where NZX had an ability to grow global scale from this country.