Locals step up as foreign investors withdraw

Foreign ownership of New Zealand shares is slowly reducing according to brokers Goldman Sachs JBWere.

The firm said offshore ownership of local shares dropped to 44.3 per cent at the end of March compared with 46 per cent at the same time a year earlier and the figure of 60 per cent reached in 1997.

Some one-off transactions helped the changes in offshore ownership, the most significant being the transfer of Australian Gas Light's 66 per cent stake in Natural Gas Corp to Auckland's Vector and the sale of Gunther and Brenda Gschwenter's 13.6 per cent stake in Tourism Holdings.

Foreign ownership had been steady over the last two years while "strategic" ownership of the market had increased, Goldman Sachs JBWere analyst Shamubeel Eaqub said.

"We estimate that 17.1 per cent of New Zealand equities are owned by local strategic investors [10 per cent ownership of a particular company], up from 15.1 per cent in 2004," he said.

Goldman Sachs JBWere economist Brendan Doyle said the high foreign ownership levels of the late 1990s reflected the negative view held by local investors at that time.

"The fact that we have seen that drift lower over almost 10 years is another thing I would regard as positive," Doyle said.

The Government's superannuation fund, or the "Cullen Fund", had also made an impact.

"The other thing might be generational. We are getting investors who do not bear the immediate scars of the 80s, but who realise that the market now is very different," Doyle said.

Goldman Sachs JBWere's analysis showed that managed funds had broadly maintained their market share from last year (15.6 per cent compared with 16.1 per cent).

The most important development in this segment had been the regulatory changes in the last Budget, which normalised tax treatment for managed funds with that of individuals with respect to domestic shares.

New Zealand retail share ownership increased a little to 23 per cent from 22.7 per cent last year.