New Zealand Securities Markets
This section briefly describes the securities markets in which the Commission performs its work. We have used the latest statistics available in each market sector. As well as using our own data bases, statistics were obtained from the Reserve Bank of New Zealand (RBNZ), the New Zealand Stock Exchange (NZSE), Morningstar Research Limited and the New Zealand Futures & Options Exchange (NZFOE).
Equity Securities The market capitalisation of New Zealand shares listed on the NZSE as at 30 June 1999 was $51.1 billion compared with $43.6 billion last year, a 17 percent increase. Figure 1 shows that market capitalisation (measured at the end of each month) bottomed out in September 1998 at $38.6 billion. The figures for the year include new listings, most importantly, Auckland International Airport Limited (July 1998) and Contact Energy Limited (May 1999). The after shocks of the Asian crisis continued to be felt around the world, also the difficulties of the Russian and Brazilian economies. This became particularly apparent in the third quarter of 1998. The New Zealand share market was affected by this (see Figure 1).
The value of share turnover in the year to June 1999 was $27.6 billion, a 22 percent rise when compared with $22.6 billion for the previous year. These figures include both on-market and off-market transactions in listed securities.
The ownership of New Zealand listed equities is dominated by offshore organisations. Institutional investors are the most prominent owners of New Zealand listed equities, although the privatisation of Auckland International Airport Limited, Capital Properties New Zealand Limited and Contact Energy Limited has resulted in a significant increase in the number of private individuals holding equities.
The NZSE is established by the Sharebrokers Amendment Act 1981. It regulates the conduct of its members and makes its own rules, subject to approval by the Governor-General. It makes its own Listing Rules in consultation with the listed companies. The Listing Rules were revised as at 1 January 1999. The Market Surveillance Panel regulates listed companies in accordance with the Listing Rules.
Debt Securities There were 18 registered banks as at 31 March 1999. All registered banks are subject to the prudential supervision of the RBNZ. They are also subject to the advertising provisions of the Securities Act 1978 and Regulations. They abide by the rulings of the Banking Ombudsman.
The New Zealand household sector's aggregate investment in debt securities issued by both bank and non-bank financial (M3) institutions was $42.6 billion as at 31 March 1999, compared with $44.6 billion a year earlier. These holdings represent the majority of debt securities issued by financial institutions.
Market sources estimate that $6 billion of corporate bonds were on issue at 31 March 1999.
Life Insurance The value of life insurance products with an investment component was $9.8 billion as at 31 March 1999. This figure excludes term life products that have no investment component. $7.1 billion comprised non-unitised insurance contracts (e.g. whole of life policies, endowment policies) and $2.7 billion comprised unitised insurance contracts (largely insurance bonds).
Superannuation The total value of managed superannuation funds was $15.3 billion as at 31 March 1999. Of this figure $9.7 billion was invested in employer-sponsored superannuation schemes.
Unit Trusts and Group Investment Funds The value of net assets under the management of New Zealand retail unit trusts and group investment funds was $10.3 billion as at 31 March 1999. Of this $3.5 billion was under management with insurance companies, $3.1 billion with registered bank associates and $3.7 billion with other fund managers.
In addition there was $5.2 billion managed under trust account type arrangements.
Futures Contracts A total of 1,298,259 futures and options contracts was transacted on the NZFOE in the year to 31 March 1999, compared with 1,326,563 contracts traded in the previous year. This represents a decrease of two percent. Volumes are dominated by the 90 Day Bank Bill Futures Contract which accounted for about 94 percent of the total volumes for the year to 31 March 1999.
All shares in the NZFOE are held by the Sydney Futures Exchange. Sydney Futures Exchange Clearing House Limited is responsible for clearing, settling and guaranteeing contracts on the NZFOE. The Business Conduct Committee is responsible under the Rules of the NZFOE for surveillance and investigation matters in respect of its members. The NZFOE conducts night trading to enable overseas and New Zealand investors to trade during the hours when the major futures exchanges around the world are operating.
The futures markets are very largely wholesale markets which attract relatively little retail investment.
Technology Trends New Zealanders' use of electronic technology to manage their private and business transactions continues to grow. It is now standard practice to trade, clear and settle transactions electronically, for example, all transactions on the NZSE and the NZFOE. This significantly reduces time lags and, in the case of the NZSE, facilitates scripless trading. Moreover, the securities of New Zealand incorporated companies listed on the Australian Stock Exchange and held on the Australian register are transferred on the CHESS system of electronic transfer.
Any system for the transfer of securities by electronic means must be approved by the Government on the recommendation of the Commission.
Many New Zealand issuers offer investors the opportunity to receive investment statements and prospectuses via the internet or e-mail. Brokers offer their services on the internet.
Section 5(5) of the Securities Act empowers us to exempt persons and classes of persons from compliance with various provisions of securities law. We give high priority to this work.
We use this exemption power to remove rigidities in the law affecting traditional investment products and to facilitate the development of new investment products, in each case so they can be offered to the public in a timely and cost-effective manner. We also use this exemption power to enable various offshore public issuers to promote investments in New Zealand. This adds to the diversity of investments available in New Zealand and makes the investment market more competitive.
We aim to avoid conferring a competitive advantage on particular investment institutions and to respect the reasonable needs of both the institution seeking the exemption and investors, present and prospective. All exemptions aim to be soundly based within the general policies of the Securities Act and Regulations.
We prefer to issue class exemptions rather than individual exemptions where we can. We prefer to consult widely when time allows, particularly where an exemption application involves significant policy questions. We recognise that this may involve an applicant company in the expenditure of time and resources for the public benefit. We are grateful to the companies and industry organisations which have given us their help on individual projects.
Significant exemptions completed this year include new class notices for offers of interests in multiple participant superannuation schemes and in retirement villages, an exemption permitting the Crown to carry out pre-prospectus market surveys to assess interest in the Contact Energy Limited float and an exemption allowing New Zealand members of a United Kingdom building society to participate in an offer by Halifax PLC relating to the acquisition of a building society.
Among the most important of our exemption notices are those which apply to the offer of securities in New Zealand by overseas companies, particularly those from Australia. A new class exemption allows registered Australian managed investment schemes to be marketed in New Zealand. This exemption reflects recent changes in the Australian law, and will replace the Australian unit trusts exemption.
The Commission has issued a discussion document relating to development of exemptions for collective investment schemes of other jurisdictions. We are presently working on exemptions for two types of United Kingdom-based collective investment schemes, authorised unit trusts and open-ended investment companies.
We considered 69 exemptions and we issued 58 exemption notices during the year. This compares with 159 exemptions considered in 1997/1998 and 111 notices issued (59 of these were part of a general review). There are 151 exemption notices now in force (there were 121 as at 30 June 1998). As at 30 June 1999 there were 22 applications before the Commission.
We are conferring with the Ministry of Commerce on the benefits of a possible extension of the Commission's exemption powers to apply not only to individual issuers and classes of issuers but also to offers defined by reference to the type of transactions or to the class of persons to whom the offer is to be made.
We have developed and apply the following objectives in settling our work programme and determining our priorities:
