Double whammy knocks share trading

The NZX says it expects the level of trading on the New Zealand sharemarket to remain "challenging" this year because of lower levels of capital raising and fear in global markets.

The stock exchange operator yesterday reported a 24 per cent drop in the June total value of trades compared to the same month last year.

The number of trades also plummeted 18 per cent, driven mainly by a 21 per cent decline in equity trades on its main board.

Value traded on the main board was down 26 per cent to $1.58 billion.

Total trade on the smaller NZAX was also down 33 per cent although value grew 46 per cent to $880,000.

Total trades were up on the NZX's debt market but value was down 2 per cent to $133 million.

NZX's head of markets Fiona MacKenzie said the big fall was partly because last year had seen a strong bounce back after the global financial crisis hit markets severely in 2008.

"As people rolled into 2009 there was almost a sense of relief that the world hadn't ended and everything looked very cheap."

But this year company valuations appeared more expensive and there was continued economic uncertainty.

"It's a double whammy," she said.

The NZX had also had a record year for capital raisings in 2009 which had acted as a catalyst for secondary trading on the market, she said.

This time last year $1.69 billion had been raised in new equity and $2.87 billion in new debt but less than half of that had been raised so far this year.

"With those catalysts not there it's harder for trading volumes to remain strong." At the same time MacKenzie said liquidity in trading markets had dried up making trading volumes volatile from day to day.

The NZX's growth in debt market trading, but at lower values, showed smaller sizes of trades being undertaken by a broader range of investors.

"People are nibbling at the market rather than jumping in, it's a sign that people are more risk adverse."

MacKenzie said she expected trading levels to remain challenging with a lower level of capital raising and tough global markets. "There is not a lot of good news at the moment.

"China is difficult, with the Government trying to slow things down. The US is difficult. The global markets are very tough and people are very nervous."

Shares in the NZX closed up 2c yesterday at $1.58.