By GEOFF SENESCALL
The New Zealand sharemarket's lacklustre performance will not be solved by merging with its Australian counterpart, says Eion Edgar, chairman of the local exchange.
"It will not necessarily change value at all," he says.
"What it will do, if it goes ahead, will create a bigger liquidity pool which could make the shares more attractive.
"But in the end it is the performance of companies that drives share prices.
"Their ability to perform is based on the environment they are operating in.
"Obviously some companies do better with a lower dollar. Others will find it more difficult."
Mr Edgar's comments come after Prime Minister Helen Clark highlighted the possibility of the sharemarket merger with Australia during her visit last week to New York, where she attended the United Nations Millennium Summit.
She raised the merger issue when questioned by Radio New Zealand about the vulnerability of the New Zealand dollar and the weakness in the local sharemarket.
Radio New Zealand also talked to Jay Schneider - principal of the venture capital firm Schneider Capital, which has investments in New Zealand - who said that a merger with Australia would be the answer for the New Zealand market's unspectacular performance.
The New Zealand and Australian exchanges are in the preliminary stages of merger discussions. The New Zealand Government has already said it will help with any any legislative changes.
But the Minister of Commerce, Paul Swain, said the ball was in the court of the New Zealand exchange. "They come up with the solution, they decide that's what they want to do, it requires legislative change, we'll do it."
There was a range of possibilities in how joining with Australia could be done, said Mr Swain.
The final shape of the merged entity could be one exchange and one set of rules for both countries. It could be the same rules with two exchanges or there could simply be protocols.
So different legislative changes might be required, he said.
A full merger, for example, would require demutualisation of the New Zealand exchange, which was owned by both brokers and broker firms.
That was a complex issue but it could be worked out, Mr Swain said.
Some of the other legislative changes might involve amendments to the Securities Act, takeover rules and insider trading provisions, he said.
Discussions between the New Zealand and Australian exchanges, however, are still in the early stages.
Mr Edgar said members of the New Zealand exchange would get an update at the annual meeting on Wednesday.
It was unlikely that any proposal would be put in front of members before the end of the year.
The managing director of the New Zealand exchange, Bill Foster, envisaged that once there was a proposition, an information memorandum would be issued to members and road shows would be held.
He said there were fundamental issues to resolve in deciding how a merged market might work.
There were issues revolving around the market and the systems that support it, the rules that govern the listing of companies and the rules that govern the operation of trading firms.
There were many hurdles but they were being worked through.
Mr Foster pointed out that both exchanges were operating successfully now.
"When talking in terms of putting both exchanges together it is about trying to add value.
"It has to be beneficial so that people can see the sense in doing it.
"If changes are required in order to capture that value then it will take as long as it takes to implement those."
NZ-Aussie merger no solution
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