Sharemarket likely to be more resilient than global counterparts

Financial Markets Conduct Act changes have likely made it easier for advisers to provide clients with advice and information on possible investment opportunities, analysts say.

Tuesday, February 23rd 2016, 5:59AM

Chapman Tripp has released a report on New Zealand equity markets, which says there will probably be a small increase in IPO activity this year, but not back to the levels seen in 2013 and 2014.

“International conditions will remain challenging for some while, which will bear on local market sentiment. However, we are aware of a number of companies considering IPOs now and more may emerge as the year progresses, assuming no further significant deterioration in the world outlook,” said Rachel Dunne, a Chapman Tripp partner specialising in corporate and securities law.

She said it was likely that New Zealand’s sharemarket would continue to be more resilient than some of its overseas counterparts over the year.

The NZX 50 is coming off a healthy performance last year up 13.6% – so is relatively well-positioned and the upcoming reporting season is expected to show strong results.

Of interest will be the extent to which the fallout from the recent receivership of Dick Smith Electronics sours retail investor attitudes toward IPO sell-downs by private equity vendors, Dunne said.

She said it was likely that there would be more pre-registration advertising used this year to reach a broader range of investors. “An opportunity created by the FMCA, and one which the Financial Markets Authority is actively encouraging to reduce the information imbalance between the retail and the institutional investor.”

Another partner, Roger Wallis, said there had prevoiously been tension between the level of research required by advisers under their Code of Conduct and the material published around IPOs.

New disclosure documents would be able to offer them more extensive information earlier to better advise clients who were interested in participating in offers, he said. Previously that level of information was only easily accessible to institutions running the issue.

“It makes it easier for advisers to discharge their obligations.”

But he said the downfall was that there was more flexibility in market transactions and things were happening more quickly. “There is greater access to information but on the other hand there is more time pressure for AFAs to get up to speed.”

Dunne said ETFs were another area of potential innovation. As at the end of January this year, total funds under management by Smartshares had increased 187% year-on-year. “We expect another increase this year given the increased focus by NZX on its Smartshares business.”

Tags: Chapman Tripp ETFs