Paul McBeth is the editor of The Bottom Line and Curious News, having worked at BusinessDesk for 15 years. He’s owned shares of NZX since January 2024.
Australia’s ASX had a pretty average week.
For those not familiar with the New Zealand sporting vernacular, that’s code for rubbish.
The stock exchange operator has found itself under the microscope of the Australian Securities & Investments Commission over the litany of failures surrounding its botched settlement system upgrade – essentially the West Island’s financial markets pipes are as leaky and creaky as New Zealand’s three waters infrastructure.
ASIC was already looking into an outage in December where traders had to scramble over the weekend to make sure orders went through for Monday morning – the saving grace being that it happened on a Friday meaning those poor Aussies could rack up some overtime.
Now it’s pulled out the big guns with an inquiry into all and sundry at the ASX to see whether the exchange operator is fit for purpose or being run by muppets.
On this side of the Tasman, it’s hard to suppress a smirk.
Empty belly
Our big brother has been poaching promising Kiwi companies to its bourse for several years, with its bigger market, deep pools of capital backed by 30-plus years of compulsory superannuation savings, and wider number of research analysts willing to poke around a potentially speculative new listing all part of the attraction to head west.
That’s if a local company’s even contemplating going public at all, given the size of the cheques being written by big money private equity players.
And to be fair, our local stock exchange operator has enough of its own scars to knowingly shake its head about the predicament Australia's found itself in.
Years of underinvestment in technology was laid bare when the NZX was caught in a rolling DDOS attack – a distributed denial of service for those to those not in the know – where cybercrooks thought it would be such fun to bombard the stock exchange’s website with a multitude of requests, essentially knocking it out of commission and bringing trading to a halt despite the actual trading infrastructure sailing through unscathed.
The spooks were called in and a big kerfuffle ensued, with the NZX getting a stern telling off from the Financial Markets Authority the following year, given the stock exchange was also stretched by the sudden boom in online investing through the likes of Sharesies when thousands of people had idle time on their hands and discovered the joys of day-trading at a time when Reddit warriors were going toe-to-toe with New York hedge funds in the Game Stop squeeze.
Back then, the stock exchange operator knew its system needed upgrading after some very embarrassing outages a few years earlier. While covid delayed the roll-out, there was certainly the whiff of New Zealand’s typical complacency when it comes to keeping infrastructure not just fit for purpose, but able to cope with obvious growth down the line.
Full of sorrow
All of which is a roundabout way of pointing out that New Zealand’s NZX is actually in a plum position as public markets start finding their feet again.
We already had the pick-up in trading volumes last year when investors far and wide decided that the return of Donald Trump to the Oval Office would only be a good thing for capital markets.
And while his Liberation Day antics upended things for a few weeks, threatening to scuttle the revival of new initial public offerings bringing companies to the fore, those fears have settled down with New York celebrating some stonkingly good debuts, Hong Kong surging back to life and Australia attracting a couple of chunky IPOs to the bourse.
It’s easy to be sceptical, but that does actually bode well for the NZX as industry and regulators put their heads together to ditch some of the things that discourage already wary local companies from going down the public path.
After all, it’s much easier to focus on your core business when you’re not trying to reassure a nosy regulator that you are up to doing your job.
No tomorrow
But removing some of those pain points for would-be issuers is just part of the opportunity, because with it comes the inevitable balancing act of not going to far and undermining some robust investor protections that can conceivably be dangled as a drawcard to new investors and participants from far and wide.
It’s easy to look at Tiger Broking’s addition of New Zealand stocks to its trading platform as a useful addition to its suite of products for its Kiwi customers.
But let’s be clear, that platform’s biggest investor pool is in well-heeled Hong Kong and getting our NZX-listed companies shopped around far and wide is one of the ways to improve the love and coverage they get from the local broking and analyst community.
We love to think of ourselves as high-value exporters, so why not put our investment opportunities in that bracket too?
Maybe it's time to re-read that old Craig Stobo-led report on setting up a financial services hub down here in the South Pacific.
Image from Curious News.
