PAUL MCBETH: Just how turned off are we from the NZX?

Paul McBeth is the editor of The Bottom Line and Curious News, and previously worked at BusinessDesk for 15 years He’s been invested in NZX, Rakon, the Salt long short fund and Smart S&P/NZX 50 ETF since January 2024 and has been a member of the NZ Shareholders’ Association since February 2024. He’s had an active Sharesies account since January 2024.

The headline figures for the NZX in 2025 weren’t too flattering, but the small end of town is increasingly picking up on some of the signs that has the likes of Devon Funds and Salt Funds optimistic about the coming year for the local stock exchange.

Sure, the benchmark S&P/NZX 50 index tracking the biggest and most well-known companies on our bourse eked out a miserly 3.3% gain for the year lagging behind the likes of the Nasdaq’s 20% rally or the more impressive 28% on a reinvigorated Hang Seng in Hong Kong.

It’s easy to think of the top 50 as the be-all and end-all – the top 10 stocks alone accounted for 69% of the value of all trading last year – but stripping them out, the S&P/NZX mid-cap index notched up a 20% gain in 2025 and digging further into the weeds, the more thinly traded small-cap index’s 28% gain was its best year since 2012.

Nothing to turn your nose up at.

Similarly, tweaks to some regulatory settings around what information has to be in an offer document have yet to open the floodgates to new listings, although advisers who help firms get ready to join a stock exchange have been much more receptive to the changes and were fielding enough new calls through the tail-end of 2025 to get their juices flowing.

And while it’s easy to latch on to the 0.9% dip in the value of cash trading through the stock exchange to $41.16 billion in calendar 2025, a 13% jump in the number of trades to almost 10.5 million points to persistently growing interest from retail investors who make smaller transactions.

Pumping up the volume

Yes, the heavy lifting in the volume of trades came through UBS brokers – who fielded a 47% increase in the number of transactions even as the value traded dropped 13% – but the pick-up for Sharesies was notable.

The upstart wealth firm has been a key driver in bringing its now 930,000-plus users to the public markets, notching up a 21% increase in the number of trades through the retail investment platform, plus a 69% jump in the value traded to $1.93 billion, nudging above ASB Securities in the rankings for the first time.

That growing support from the regular people we like to call retail investors is important given the big institutions that drive the major volumes are chasing bigger returns for the clients in global markets, with Morningstar data showing international shares accounted for 42% of KiwiSaver assets in the September quarter last year and another 4.5% in Australia, compared to 12% in the domestic market. Rewind five years to the end of 2020, and global shares made up 33% of the funds under management, Australian stock another 5.5% and New Zealand shares and listed property almost 14%.

That’s all well and good for those of us watching those growing KiwiSaver balances, but that capital flight drags attention and resources away from our local market, leaving those smaller names that performed so well last year at risk of trading at prices that don’t match their underlying business.

Just take Rakon for instance.

The high-tech manufacturer has tended to make waves over the components it makes that go into weapons systems and its at times antagonistic relationship with shareholders, but its share price has continued to look relatively cheap compared to its peers and ripe for someone to do the sums and lob in a takeover bid.

I’m comin’ up

So it wasn’t overly surprising when US manufacturer Bourns came knocking with an upcoming offer of cash well in excess of what its owners could get on market.

As New Zealand Shareholders’ Association chief Oliver Mander pointed out in the year’s first episode of The Long and the Short of It podcast, a takeover offer is the ultimate arbiter of value for a listed company – you either take it or you leave it.

That’s why reviving those big trading flows on the NZX becomes so important, because that institutional money has the scope to put its research teams to work locally, which in turn sharpens up the efficiency of the market to make sure prices aren’t out of whack from fundamentals for too long.

As much as ASB Securities and Sharesies are growing their share – Jarden facilitates Hatch’s Invest Direct trades and Tiger Broking also outsources its local brokerage – they accounted for just 4.5% of the value of trading in 2025 and 11% of the number of trades.

And the stars do seem to be aligning to make that more of a reality than a pipedream.

This brand-new beat

The early pieces of economic data out last week showed the recovery remains on track, with manufacturing activity starting to hum, building intentions getting stoked by cheap finance, business confidence returning to the point where firms are willing to start investing their money again while core inflation remains largely in check.

It’s those kinds of indicators, combined with the lacklustre backdrop of recent years, that’s got Devon Funds and Salt Funds upbeat about the potential for the NZX50 to outperform its peers in the coming year as the economic recovery beds in and fuels stronger earnings for those listed companies.

Because that underlying performance of companies still matters. Money needs to come in the door, pay the staff and leave something leftover to reinvest or spit out to the owners.

After all, animal spirits don’t stick around very long when there’s nothing substantial underneath.

Image from Curious News.