NZ money going out, foreign in
Foreign ownership of companies listed on the New Zealand sharemarket has hit its highest level in five years, as more company profits head overseas.
Investment firm JBWere said yesterday that about 36 per cent of shares in the country’s listed companies were foreign-owned, up from 33 per cent last year. This was ‘‘relatively high’’ compared with other countries, it said.
At the same time, New Zealand retail investment ownership fell by 4 percentage points to 23 per cent, while local managed funds also fell.
This combination was said to be the most significant driver of foreign ownership in the country, and a reversal of the trend of recent years, JBWere said.
But the country’s strong dividend yield market was also said to be attractive in a world of recordlow interest rates.
JBWere investment strategy associate Andrew Thompson said there was no right or wrong level of foreign ownership, but the level this year seemed ‘‘appropriate’’.
Having a third of the market owned by overseas investors showed healthy interest without domination.
The United States was at about 15 per cent, by contrast, while Australia was at 46 per cent.
‘‘Offshore investors bring a useful perspective from looking across a range of companies around the globe,’’ he said.
‘‘They are also a useful pool of liquidity to support capital raisings and new listings.’’
Thompson said the reduction in local retail ownership was probably a natural decline, driven in part by the float of several stateowned enterprises.
There had only been three initial public offerings (IPOs) this year, such as Tegel Group Holdings. This number was below the average annual IPO rate of the past 10 years. However, there had also been more retail bond issues, which would have taken some investor funds.
‘‘While we haven’t researched specifically the flow of New Zealand money offshore, it is a reasonable assumption that, with the availability of new investment vehicles that invest in offshore equities – for example, the new Smartshares ETFs and active funds – an increased proportion of New Zealand retail money is heading offshore.’’
Furthermore, Thompson said KiwiSaver was increasingly needing to look to overseas investments as it grew.
‘‘At the end of the day, our equity market remains relatively small and less liquid by global standards, so the ability for large KiwiSaver funds to buy the volumes they require in our market has natural limits.’’
JBWere’s research said the New Zealand market was still highly sensitive to global bond yields, however. Increases in bond yields in October had seen the country’s sharemarket decline, for instance, and further increases were a headwind.
‘‘Given this, we would not be surprised to see further reductions in New Zealand retail investors’ ownership of our market.
‘‘We have seen the gap left by New Zealand retail investors replaced by offshore investors, whereby low, and in some cases negative, bond yields around the world have highlighted the appeal of New Zealand’s relatively generous dividend yields.
‘‘We also expect that the level of foreign ownership of our market could very well fall in 2017.’’
"An increased proportion of New Zealand retail money is heading offshore." Andrew Thompson, JBWere