PAUL MCBETH: Capital markets still matter

Paul McBeth is the editor of The Bottom Line and Curious News, and previously worked at BusinessDesk for 15 years. He’s owned shares of NZX since January 2024.

A little over 16 years ago, the Capital Markets Development Taskforce led by the now late investment banker Rob Cameron succinctly explained why capital markets matter in that they provide businesses access to cash and make it easier for savers to grow their wealth.

By doing so, both sides of the equation get to manage their risk a little bit better.

And if you were to think about that in the real world, firms tend to need more money when they’re out on a hiring binge because they see an opportunity that needs more bums on seats and fancier equipment to achieve that.

Likewise, savers want to make that big-ticket purchase of a car or a house a little faster or squirrel funds away for a slightly bougier lifestyle when it comes time to throw in the life of a wage slave.

Of course, most normal people’s eyes start to glaze over when an enthusiastic finance bro like yours truly starts to wax lyrical about the virtues of free-wheeling capital before the real message starts to sink in that better jobs and a better lifestyle is just, well, better.

The longer I wait the harder I’m gonna fall

Hence the laundry list of good ideas typically gets left in the nice-to-have basket for policymakers, who are more at home when talking about waiting hospital lists, cops on the beat and school attendance rates than whether the nation is overly reliant on four Australian-owned banks to pay the way for all and sundry.

Putting all that to one side for a moment, regulators around the world are actually trying to breathe life into their more visible public markets, which have been left behind in recent years as the ever-deepening pools of private equity and debt have been the favoured source of funding for those firms aspiring to be the big end of town and a more attractive place for those elite investors who can join the club to put their money to work.

New Zealand is no different, with the energetic Andrew Bayly embarking on a suite of reforms to encourage a bit more activity for the NZX when he held the commerce ministerial warrant, most of which have been picked up by his more subdued successor, Scott Simpson.

That’ll mean smaller fees for some of the advisory firms if potential listing candidates decided against putting up the previously prescribed financial forecasts, plus side-stepping the poorly targeted climate disclosure reporting for the bulk of companies on the local stock exchange.

Throw in the Law Commission’s review into noodle bowl of directors’ liabilities gathering steam this year, and things look more attractive.

Still here in this quiet room

That’s not hurt by Australia’s less ambitious moves to sharpen up its regulations to support new listings as the Australian Securities and Investments Commission spends more time trying to sort out the myriad internal issues plaguing the ASX, while also wanting to peer into the black hole that is private capital.

There’s still work to do on this side of the Tasman, with some of the finer elements of director liability when it comes to continuous disclosure obligations – those pesky requirements for listed companies to keep people informed of what’s going on – but if the local regulatory burden comes down a little more, that will remove an important barrier when it comes time for a firm to weigh up listing.

Chapman Tripp partner and all-round capital markets guru Roger Wallis reckons that could strip out 50 basis points from the cost of equity capital – that’s a sizeable chunk of change for a board weighing up whether to tap those private equity players or hit up a bank to fuel some expansion plans.

All of which is contributing to the most optimistic tone in years from those in the know about what 2026 might hold for new listings on the local stock exchange.

That’s great news for those firms if they can access funds at a cheaper price, and providing investors with a broader array of options can only be a good thing, even if the looser regulations can be seen as coming at the cost of protections for the little guy.

Inside time stands still

Of course, getting the regulatory settings right are just one part of the equation.

Ultimately, it’s up to business owners if they want to go public and market participants to drive the conditions that will make an initial public offering a success, both areas that have been lacking in recent years.

On the former, the conditions do seem riper for companies to go public, especially if the US titans such as SpaceX, OpenAI and Anthropic press ahead with their plans currently being dangled in the global business pages.

The latter still seems to be struggling to keep pace as the local broking firms continue to focus their research teams on the biggest – and most lucrative – local firms and that long-tailed liquidity issue continues to drag its heels as the institutional investors continue to stick to the top 20 stocks or so.

Some might see that as an opportunity that’s going begging as the near-million customers using the Sharesies platform aren’t limiting their investment world so narrowly, albeit one on a more modest scale than the billions of dollars that the big investment houses shift for their clients.

Let’s see whether anyone is up for the challenge of grabbing a friendlier regulatory environment running with it.

Image from Curious News.