New Capital Market 'resting'

Friday 20th April 2001

By Nick Stride

After an initial wave of listings the New Capital Market is becalmed but brokers expect more activity when economic activity improves.

The junior market was launched by the Stock Exchange in March last year and attracted 11 listings by year's end. A total of $6.45 million was raised in initial public offerings and two subsequent offerings have raised a further $3.6 million.

But there have been no applications so far this year, although brokers report a steady flow of enquiries. "It would be a rare day when you didn't get a phone call," said Forsyth Barr's Neil Paviour-Smith. "But we need to do high-quality (listings). We aren't looking for venture capital proposals."

Like other brokers, Forsyth Barr's approach was to do two or three listings - its crop last year was Mowbray Collectables, Mooring Systems, and Compass Communications - and then analyse how they had gone.

The exchange is also analysing the new facility. It has reported to the Securities Commission on the market's first year and has made a number of changes to the original rules after consulting organising brokers and NCM issuers. Some rules have been tightened up and others liberalised, and further changes are under consideration.

Brokers attribute last year's deluge of listings to the fact the market had been well-publicised in advance, generating some pent-up demand. They expect activity to continue as a steady trickle once teething problems have been sorted out.

The market's debut has also been affected by general economic and financial market conditions. Economic growth has been weaker than anticipated and business and consumer confidence are at low levels.

The long slide of the US Nasdaq index may also have affected investor enthusiasm for the higher-risk stocks the market houses.

NCM companies are also competing for investors' attention with a swag of unlisted securities market stocks.

Of the 10 NCM-listed stocks eight are at or near post-listing lows.

Selector Group, which listed on the NCM as E-Opportunities but has graduated to the main board, is trading at just 6c, down from a high of 72c. Only Mooring Systems and Cabletalk are at a substantial premium to the issue price.

However, none of the NCM issuers has yet reported a profit result and some have yet to complete their "key transaction."

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