Shares in SLI Systems, a website search operator, rose as much as 20 percent after listing on the NZX this morning, joining a slew of New Zealand companies going public in the face of resurgent demand for the returns available from equities.
SLI, which provides online retailers with search tools, rose to NZ$1.80 on listing at 10.30 am, 30 cents above their $1.50 offer price. The stock recently traded at $1.75. The company raised $27 million in its initial public offering, $15 million of which will be invested in developing the business, with the remainder going to its investors.
SLI joins Mighty River Power, Snakk Media, DNZ Property Fund, Summerset Group shareholder Quadrant Private Equity and Metlifecare in raising funds from the public this month. Still ahead for investors may be offers from Meridian Energy, Serko, Z Energy, Punakaiki Fund and Fronde Systems Group.
“Definitely the New Zealand equity capital market is in pretty rude health,” said Shane Solly, who helps manage more than $200 million at Mint Asset Management. “It would be great to see it continue.”
New Zealand’s government is selling down holdings in state-owned companies such as Mighty River, Meridian, Genesis Energy and Air New Zealand to release funds for debt repayment and investment and also to encourage people into the nation’s stock market, making more capital available for companies and improving the depth and liquidity of the market.
The government wants to improve the nation’s savings rate to help strengthen its balance sheet and diversify investment away from less productive areas such as housing.
“Capital is such a crucial part of getting companies to grow,” Economic Development Minister Steven Joyce said in Christchurch at a function for the SLI listing today, citing the government’s attempt to expand capital markets with its mixed ownership model.
Helping boost the supply of money for investment is the KiwiSaver scheme started in July 2007, which enables New Zealanders to put aside funds for their retirement, with some of the money finding a home on the local stock market. At the same time, lower interest rates have made bank term deposits less attractive.
KiwiSaver funds have experienced a “phenomenal growth rate” increasing to $14.5 billion at March 31, from $954.1 million at June 2008, according to a survey by Morningstar.
“KiwiSaver is getting some size and some momentum,” said Mint’s Solly. “The economy is sound and people are prepared to put away some income for a nest egg.”
Finance Minister Bill English said the Mighty River listing was part of the government’s programme for economic growth.
“An important component of that is deep and liquid capital markets,” English said at the May 10 listing in Wellington. “It’s also part of a programme to improve the environment for New Zealand savers and improve their investment opportunities. We believe that the float of Mighty River, followed by the others, will bring about a long term shift in the attitude of New Zealanders.”
New Zealand’s stock market has long been at a disadvantage to Australia, where a compulsory pension scheme provides about A$1.58 trillion for capital markets, and has boosted interest in markets.
That may be changing. New Zealand medical device manufacturer Fisher & Paykel Healthcare said this month that the biggest swing in its shareholding was from Australian to New Zealand institutions.
Meanwhile, shares in NZX, which gets about 37 percent of its income from listings and trading fees, have gained 16.5 percent this year and recently traded at $1.41.
“I am sure we will look back in five years’ time at this as one of the key milestones in the resurgence of our market,” chief executive Tim Bennett said at the Mighty River listing. “I hope (this is) the start of a re-education of New Zealanders on the benefits of investing in equities as part of a balanced portfolio rather than a singular focus on housing and bank deposits.”