What changed in your business and what stayed the same this year?
Global volatility and a low interest-rate environment have driven trading volumes to record levels. By June 2020, NZX’s secondary markets had eclipsed its total number of trades executed for the full year 2019 and by early September the total value traded had also surpassed 2019. Overall share of trading by customer type during this period remained consistent with historical averages, with retail and algorithmic execution accounting for approximately 18% and 22% of all value traded, respectively. This is encouraging as it signifies that the growth in the market has not been isolated to institutional investors only, but has been experienced across all market segments.
What was the impact of the pandemic and/or the economic slowdown?
While New Zealand has been in an enviable position compared with the US and most other countries around the globe, there is no getting away from how important “ready money” has been to Kiwi businesses through the first half of 2020. The economic shock of the Covid-19 lockdown and international travel restrictions created an urgent need for cash flows – with listed companies moving quickly to repair and recapitalise the equity side of balance sheets.
The total of more than NZ$5 billion of capital raised on the secondary market in the 90 days from the beginning of April dwarfs what happened in the early months following the 2008 global financial crisis. This access to capital has undoubtedly saved many jobs in New Zealand, and softened the economic shock for our country.
The pandemic has demonstrated the importance of the listed market for New Zealand – not only in supporting Kiwi businesses but also in providing investment opportunities into New Zealand for all investors. These two proven benefits have reinforced the significant opportunity to develop our listed market to support New Zealand’s longer-term growth and success. This is where we need to turn our attention, to create further resilience and sustainable value for our country.
What has the pandemic taught you that you didn’t know pre-Covid 19? We have learned just how important the hard decisions New Zealand took early, were to our country – insulating New Zealanders, our businesses and our economy to some degree from the health, human impact and economic damage unfolding in other parts of the world. The finance sector, including our capital markets, has been well-served by financial measures from our government and the Reserve Bank.
What’s the most lasting change that 2020 has brought?
The required lockdown in New Zealand through March and April resulted in a sudden and dramatic reduction in the demand for goods and services, along with global supply chain disruptions. This severely restricted cash flows for many listed companies.
In particular, those exposed to international tourism and travel – previously New Zealand’s biggest export sector, making up about 20% of total receipts – were impacted early on. Along with the international education sector and other industries that rely on migrant labour, these issuers continue to face the reality of ongoing international travel restrictions and some uncertainty about the longer-term picture.
What was your most important project this year (regulatory or otherwise) and did it change due to Covid-19?
As soon as the magnitude and seriousness of the impacts of Covid-19 was understood, New Zealand companies knew they had to respond – and quickly. Having access to the necessary capital to protect businesses and save jobs was at the forefront of every Board and CEO’s thinking.
To assist, NZX also moved swiftly, introducing a lift in capital raising capacity to help NZX-listed issuers weather the impacts of the pandemic. This included an increase in the capacity under share purchase plans, which has supported retail participation in these offers, along with measures to allow greater flexibility in the types of offer structures and in the timeframes for financial reporting. These measures were supported by recent rule changes, making it more efficient to raise further capital.
What was the biggest challenge for the leadership team? What were your (personal) best and worst moments of 2020?
As we reflect on 2020, we are acutely conscious that we cannot yet see the full consequences of Covid-19. Significant underlying challenges remain for many companies locally, from the ongoing global health threat and related operational and financial impacts. This is a time of critical need for our customers and country, requiring further collective action, adaptation and innovation at pace.
We are tremendously proud of how our team at NZX has worked as an essential service through what has been an uncertain and unsettling period. I am most proud of how our people have stood up in these tough times.
What do you see as the key themes for 2021?
Given the value of listing, which has been highlighted in the current environment, our focus is on promoting the market to other companies who may need to access capital or to owners who may want to release capital for other purposes.
A strong pipeline of listings is building across equity, debt and funds as companies recognise the benefits of having access to capital and look to attract the large pool of investible cash that is available.
2020 has highlighted the broader opportunity which is available for current private companies to use the listed market to access capital. The Capital Markets 2029 report highlighted an estimated 1,200 private companies in New Zealand with annual revenues in excess of $30 million. These companies are significant employers of Kiwis and collectively large contributors to the New Zealand economy. It is likely that a significant number of these companies would benefit from further access to capital – either now or in the future – so we see huge potential to continue to develop the listed market to support the growth of these business and, in turn, New Zealand.
In terms of broader market development initiatives, we are focused on progressing the recommendations of the Capital Markets 2029 report.