Forum Archive Index - March 2003

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Ben,

> 
>I hear what you are saying, but the counter argument to this is that
>when comparing the NZ50 to any other major index in the world, the
>results will be very misleading.
> 
>I can see what Mark Weldon was trying to drive at by introducing the
>NZ50. Our sharemarket has gone "nowhere" over the past five years,
>but when you include dividends paid, returns have been very good
>indeed.
> 
>However, for NZ's capital markets to have credibility we have to use
>the same standards as the rest of the world when reporting index
>returns.  It's fine for you and me and other people on this forum
>that understand the difference between a capital and gross index,
>but how about the majority of the investor population?  Gaynor is
>right - investors ought to beware when comparing the NZ50 to the
>rest of the world's markets, because the "returns" are not what they
>seem.
> 
>


Yes, I agree Ben that the distortion the NZSE50 introduces with 
respect to other indicies over the world is not good.  It has the 
potential to annoy overseas investors who don't understand 
that we run a 'dividend reinvestment' policy index.   But given that 
we only represent 1% or something of the world's capital markets 
perhaps Weldon is admitting a kind of defeat.  Namely that we can't 
expect overseas investors to prop up our market and we have to look 
to the locals to do it.  

If the way to build local support is to introduce the NZSE50, so that 
advertised returns are comparable with advertised bank returns, then 
I guess this is one way of going about it.


>
> Besides the NZ50, I think Mark Weldon has been doing
> an incredible job and deserves to be commended.
> 


Given his job is to promote the New Zealand Stock Exchange (more to 
locals?) I would say his move to the NZSE50 is right on target.

Personally I would prefer to see more recognition of the importance 
of dividends and the retention of a capital value only index.  
However, we live in a country where the newsmedia only reports glib 
index numbers (have you ever heard a news report where the average 
yield on all New Zealand shares is reported?- I haven't!).  Ten 
years of trying the old way hasn't had a big impact on the number of 
New Zealanders owning shares in their own market.   So perhaps Weldon 
is right.  Time to try something new?

SNOOPY



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