Allied Farmers still unhappy with NZX50 explanation

Allied Farmers remains dissatisfied with two explanations from NZX, the New Zealand stock exchange operator, about its actions last week which informed a non-public group on Monday that ALF shares were to become part of the NZX50 Index from today, and then rescinded that position on Friday.

Allied Farmers shares rose 23 per cent over the week, before falling more than 11 per cent on Friday after the reversal of the earlier indication was sent to market participants.

NZX reiterated in a statement this morning that Alied Farmers' short trading history since taking on non-toxic assets of the failed Hanover finance company last year was behind its exclusion from the index of the top 50 New Zealand stocks.

NZX had resolved that "a longer trading period, via a quarterly rather than a monthly index review, would be appropriate before it is reconsidered for inclusion in the index".

"This will ensure that all investors have sufficient time to consider the performance of the stock under its new corporate structure before an index inclusion."

NZX said: "As advised on 19 February, the Index Group at NZX distributes a monthly index memo to a wide group including data vendors, fund managers and market participants. The distribution of index-related information via these channels is common global practice.

"Index information does not originate from the Issuer. As such it falls into the category of broader market-related information that is factored into investment decisions and/or recommendations.
There are many factors which are external to an issuer that may be of interest to investors in stocks, such as research reports, credit ratings and the like."

Allied Farmers chief executive Rob Aalloway said the explanation did nothing to allay his concerns about NZX, both from a listed company perspective, and as an investor.

"Here we have the New Zealand market operator disseminating information which will have material influence on a stock to a select few people," he told BusinessWire. "That's the biggest issue I've got."

Allied Farmers would be seeking initial legal advice on the issue this afternoon, Alloway said.