Broking shuffles outpace share trades

By GEOFF SENESCALL

More activity is going on in the broking community than on the sharemarket.

Firms such as Merrill Lynch are leaving, and the likes of Macquarie and BNP are looking to set up broking operations here.

Then one of the country's largest private client firms, Forsyth Barr, merged with the oldest private client firm, Frater Williams.

On top of this, came the recent purchase of Ord Minnett by Chase.

This week, the new owners reduced staff in the corporate office.

Much more is also going on behind the scenes in the local broking community.

All this is happening as the New Zealand Stock Exchange is in merger talks with the Australian exchange.

An increasing number of brokers and corporates are growing nervous about the implications of New Zealand tying its exchange to the Australian market.

Various parties are lobbying the Government, and other influential business people, in a bid to stop the merger of the two exchanges.

Their argument is that the move will exacerbate the exodus from New Zealand.

But Stock Exchange chairman Simon Allen disagrees.

"What is happening now in the broking world will happen regardless of whether the exchange merges with Australia or not," he said

It was part of a globalisation and consolidation process that was happening worldwide.

"It is occurring at the broking level, it is occurring at the investor level, it is occurring at the listed company level," said Mr Allen.

"We have already seen significant consolidation happen among fund managers."

Over the past three years, the institutional client base in New Zealand had shrunk by about a third.

At the same time, major companies such as Telecom, Carter Holt, Air New Zealand and The Warehouse, had expanded into Australia.

Across the Tasman the same phenomenon was happening as Australian companies looked further afield.

Trying to stop this happening was impossible, Mr Allen said.

"The decisions that are taken about businesses, when those businesses in New Zealand are owned by overseas parents, are being made overseas.

"Look at the banking industry, look at the investment banking industry, look at the broking industry, look at the funds management industry. They are all overseas owned."

Furthermore, more than 85 per cent of New Zealand turnover was done by overseas-owned sharebrokers.

So New Zealand had a duty only to try to maximise its present position, and it was apparent that it needed to strengthen its capital market efficiencies.

As part of that, the aim was to broaden the investor base for local companies.

Merging with the Australian exchange was seen as a possible way of achieving that, because it was a larger organisation.

While New Zealand retail clients invest in Australian companies, the flow did not come back the other way, Mr Allen said.

Part of the merger work now being done was to make it as easy for an Australian client to buy a New Zealand share as local one, and vice-versa.

Tapping into the Australian institutional market would also significantly broaden the capital base available to New Zealand companies, he said.

If this could be achieved through a merger, that would at least give local companies the option of remaining here.

He said nothing had been decided yet, and a lot of issues had to be considered.