Property is in the headlines, but stocks are the silent winners

NOTICE: In a year dominated by the pandemic, it’s easy to lose sight of the many incredible things being done across the country. Resilience clearly defines the national experience in 2021.

Our capital markets have never been stronger. And this is vital for our way forward. As a result of the government’s massive fiscal and monetary stimulus, it will increasingly fall on the private sector to grow our economy in the years to come. A strong private sector, with access to capital to grow and innovate, will support the economy through taxes and job creation.

One of the reasons for optimism about the future growth of the capital market is the significant re-engagement of investors in equities as an investment class that we see today. We have seen increased levels of investor participation in the equity and debt markets. The 139 listed companies have better access to capital to further support innovation and job creation. But it’s also good news for your everyday Kiwi – who is also seeing their savings grow, whether through direct investments or their KiwiSaver funds.

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It is an important message that is misunderstood by many. Independent research by Canstar shows that NZX shares have outperformed house price increases since 2000. The NZX top 50 index climbed 625% between January 2000 and September of this year, while house prices rose by 414% over the same period. Report by Things in November, the net rental yields on cash investments in real estate are also lower than the net dividend yields on NZX shares.

This performance reinforces the calls of the Reserve Bank and others for greater diversification of asset classes among investors. This is prudent advice and it makes even more sense in 2022, as increasing housing supply and other government measures will see the housing market start to stabilize.

Even with a future downturn, the NZX will generally be less volatile than other global stock markets.

We have seen real dynamism in the market this year, with excellent growth in equity and debt quotes, the green bond market, new and secondary capital raised and market liquidity levels. And as a result, more Kiwis than ever hold KiwiSaver investments, around 67%, while 42% hold stocks and 36% hold stocks through managed funds.

Our market is democratizing, as evidenced by the enormous growth of investment platforms such as Sharesies, Jarden Direct, ASB Securities and advisory activities to private clients.

RNZ

My Food Bag has a history of humble origins. Is this the next thing to invest in? (Video first published in February 2021)

Connecting investors to investment opportunities is what the market does, helping people and businesses grow their wealth to realize their dreams and ambitions, whether it’s security or opportunity.

The central role of the stock exchange in the economy is to help market price and manage risk and facilitate the efficient allocation of resources in the economy. If we get it right, our engine for growth runs smoother and faster.

Our pipeline of new offerings is strong, nine last year, nine more in 2021, and we anticipate more exciting market opportunities in 2022.

We can do even more with effective collaboration across the capital markets ecosystem – issuers, brokers, fund managers, and we at the stock exchange – because we each have different but equally crucial roles in welcoming news. registrations to deepen our capital markets. Welcoming companies, listening to their stories, understanding them and supporting them is as much the role of a fund manager as that of the stock market.

We just need to look at our most recent listings to see this in action. Just last month, we welcomed two great new companies to the exchange. These lists are extremely important to them and to our economy.

Covid is a terrible reminder that the global challenges we face as a country are big while we are small. The NZX is experiencing this every trading day, and we know the country depends on the quality of our local response. Access to capital is crucial for this response, for the growth of the economy, the orientation towards productive sectors, the deepening of capital markets and the strengthening of economic resilience.

Although we are small, the ambition of NZX is not. We are often unfairly and overly simplistically compared to large foreign exchanges, as if our pipeline of new listings needs to match NASDAQ, the world’s leading technology trading platform. Their new quotes as a percentage of total listed companies are 8.9%, just over double those of the NZX. Still, NASDAQ’s market cap is 187 times our own, so NZX’s performance, given the differences in scale, is courageous.

Indeed, in the two years leading up to October 2021, the 32% growth in market capitalization of the NZX outperforms the much larger exchanges of New York (31%), ASX (31%) and Tokyo (12%). %).

We have come a long way. There is good reason to be optimistic about the future of the country and the role that New Zealand’s capital market can play in realizing the aspiration and ambition that we all have.

Mark Peterson is Managing Director of the New Zealand Stock Exchange

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