KEY POINTS:
Market turmoil has seen the sharemarket's value relative to the wider economy fall to a five-year low, according to data released yesterday.
Market operator New Zealand Exchange's monthly figures show the total value of companies listed on the NZX main board and NZAX alternative market fell 21 per cent in the last year to $59 billion, or 35 per cent of annual gross domestic product.
That is the lowest level for that particular measure since 2003 and one of the lowest readings among developed economies.
By comparison, the total value of companies listed on Australia's ASX as at the end of March represented 110 per cent of that country's GDP. The slump has occurred in tandem with the benchmark NZX-50 index's 16 per cent fall in the last year and 14 per cent decline in the year to date.
NZX chief executive Mark Weldon said the market's slump in value relative to GDP was "clearly something that is of concern", but it was also "clearly something that can be fixed".
To some extent though, the horse had already bolted. "If you look at the banks, for example, there's little likelihood of 100 per cent of them coming back to the New Zealand market."
Nevertheless there was considerable scope for increasing the sharemarket's intersection with both the public and private sectors through partial listings of large state-owned enterprises and farmer-owned co-operatives.
Weldon said NZX's strategy to diversify its revenue streams so it was not dependent on clipping the ticket on trades was intended to ensure "that we will be around for however long it takes for this number to grow".
However, it seems likely that these alternative revenue streams, including that from selling NZX data to overseas investors, will be affected by market turmoil, especially with swingeing headcount cuts in the world's major financial centres.
"You would start to see some shrinkage in the data terminals," said Weldon, "but that's not something we expect to be dramatic and it's not something we expect to see in the next month or so." The sub-prime crunch has ended a fantastic five years for the New Zealand sharemarket.
During this time its market capitalisation rose from $40.4 billion in early 2003 to $77 billion before the sub-prime crisis hit
