Telecom trading hangover hits

NZX chief executive Mark Weldon expects a flight to quality by investors. Picture / Geoff Dale

Heavy trading in Telecom following the May announcement of a new regulatory regime has slowed in recent weeks but was still evident in NZX's latest operating numbers.

The value of transactions on the main NZSX board was down 36.5 per cent in June compared with May, when they more than doubled from the previous month on massive turnover in Telecom. However, turnover by value was still 15 per cent ahead of June last year.

By volume, transactions were 20 per cent down on May and 4 per cent down on the same period last year.

The NZSX's headline index was little changed over the month and its total capitalisation at $62.65 billion was down 1.9 per cent on the previous month and 2 per cent on a year ago. During June, Telecom's share price declined a further 10 per cent after plunging by 22 per cent in May. Over the two months the company's market cap has been reduced by $3.3 billion.

Meanwhile, NZX chief executive Mark Weldon was optimistic a flight of capital out of the housing market and finance company debentures could be matched with quality new listings to provide a more constructive boost to trade during the rest of this year.

With worsening conditions in the housing market, especially for investors, and increasingly negative sentiment towards finance company debenture stock after recent failures of National Finance 2000 and Provincial Finance, Weldon expected to see "a flight to quality".

"We're hearing of a lot of appetite for new products, it's a matter of companies getting good quality offerings to the market in the back six months of this year.

"Whether the companies are out there and ready to take advantage of that healthy appetite, we would hope so," he said.

Meanwhile, Weldon was encouraged by the $2.1 billion in capital raised across the NZX's main equity board, its NZAX alternative market and the NZDX debt market so far this year. He said he believed the total for the 2006 calendar year could be double that amount.

"Four billion dollars is a pretty decent chunk of fresh money being raised for investment purposes on our market, given its total size."