Capital Markets: Can ChatGPT predict share price performance?

It’s clear that the capital markets will continue to face significant headwinds, with many of the same pressures and external forces that have shaped the sector in recent years still in play.

Persistently high inflation remains a top concern. While it remains stubbornly elevated, there are encouraging signs that it may have peaked after a considerable effort from central banks to rein in spending.

Much of the supply chain disruption caused by Russia’s invasion of Ukraine has stabilised, but persistent geopolitical tensions and fragmentation, particularly between China and the United States, continue to pose a risk to economic and financial stability.

Adding to the complexity, the pandemic-induced global talent shortage is still acutely felt in multiple sectors, including certain areas of the capital markets.

Gaining momentum are several megatrends that have become entwined with the capital markets sector. These include the rapid technological evolution, the growing need for robust cybersecurity measures to protect against digital threats, and the ever-increasing demand for sustainable investment options.

Capital Markets: Rising appetite for NZ on the ASX

Capital Markets: Rising appetite for NZ on the ASX

The Australian Securities Exchange (ASX) has been pursuing a strategy over the past five years to increase the diversity of stocks available.

Diversification is a central tenet of well-balanced portfolios, and that means companies in the technology and life science sectors are in high demand. Institutional investors, in particular, seek additional investment prospects beyond the long-standing dominance of mining and financial firms on the ASX.

Blair Harrison, head of New Zealand Listings at ASX, says investors are also looking for diversity in geography, and for that reason they also like to see New Zealand companies in the mix.

New Zealand’s burgeoning tech sector already has a formidable presence on the ASX.

Until recently, 10 of the 65 New Zealand companies listed on the ASX were technology companies, two of which were included in the ASX All Tech Index (earlier this month church donation company Pushpay was delisted after being sold to a consortium linked to a Melbourne-based private equity firm).

Xero has achieved “unicorn” status on the ASX as a technology company with a valuation or market cap of over $1 billion. With a market capitalisation of more than $10b, the New Zealand-founded accounting software company is now one of the largest on the ASX, the fifth largest company by market capitalisation in the All Tech index and a constituent of the ASX 50.

Harrison says from an investor standpoint, New Zealand tech companies are well respected globally.

“They tend to exhibit an entrepreneurial approach, demonstrate good governance, and possess a global mindset right from the outset,” he explains.

“This is largely due to the challenge of geographic distance. Being a country that is far away, these companies are aware they must target international markets and adopt an international perspective from the very beginning, which companies in Australia don’t necessarily have to do.”

The large investment community and significant number of companies in Australia mean that New Zealand technology stocks have greater scope to be covered by analysts. The ASX has close to 250 technology companies and around 200 companies that come under the umbrella of life sciences.

Harrison explains that this means that Australia has fund managers, researchers and brokers who can specialise and have greater familiarity with the sectors.

“Rather than one analyst who covers a range of sectors — from industrial to consumer products to technology — you can have a team of people focused on a particular sector, which means they have a very good understanding of how a company is performing.”

That research, in turn, raises the awareness of emerging New Zealand companies among Australian and international fund managers.

These companies can also be compared against similar ASX-listed healthcare and technology companies, which helps analysts determine company valuations and provides economies of scale in research.

Harrison says there is a robust pipeline of technology companies looking to list, and he expects to see New Zealand tech continue to thrive on the ASX over the next few years. This is driven by investor appetite, both from Australia and New Zealand, and further afield.

Beyond tech, other New Zealand sectors that are in demand from the ASX investor base are infrastructure stocks including airports and ports which are not common on the ASX. New Zealand’s aged-care sector is another of interest.

Looking ahead, Harrison says the scale of superannuation funds across Australia and New Zealand will have an impact on investment choices and companies that come to the stock exchange.

By 2041, the total superannuation assets of Australia and New Zealand combined are expected to approach A$10 trillion.

“We know that a lot of that superannuation fund money goes into the stock market,” he says. “That means there will be a huge demand for companies to come to the ASX, and in particular, demand for companies that meet the attributes that the demographic are looking to invest in.”

He points to the rise in economies focused on climate change and the future of food as an example of this.

“ESG is having a huge impact because investors are becoming more powerful. We are all becoming investors — either directly or indirectly — through our superannuation, which is growing exponentially.”

Listings down last year, but higher activity in follow-on offerings

When volatility and uncertainty sweep across global economies, the volume and value of initial public offerings (IPOs) on share markets fall. IPOs were down around the world in 2022, attributable to volatility in the markets brought on by significant macroeconomic events, including Russia’s invasion of Ukraine and surging inflation.

While this was also true for Australia, the ASX still managed 107 listings in 2022. Almost all these listings were in mining, particularly for battery materials like lithium, copper, nickel and gold, which are in high demand.

This figure is close to its annual average of around 135 per year, but down from a phenomenal 2021 that saw 241 companies debut on the ASX fuelled by the cash that was injected into the economy.

“We continue to engage with companies and stakeholders in the ecosystem,” says Harrison.

“Those conversations haven’t slowed down at all, and once the level of volatility returns to a normal level, we expect a lot of these listings to come to market.”

The ASX tracks volatility through the S&P/ASX 200 VIX, a real-time volatility index. This enables interpretation of investor sentiment and market expectations. Notably, the ASX tends to witness higher IPO activity when the VIX value falls within the 10-15 zone.

Despite the decrease in listings last year, the ASX saw higher activity in follow-on offerings as ASX-listed companies raised capital. Follow-on offerings, which include placements, rights issues and share purchase plans, can also be used to bring new sophisticated and institutional investors into a share register and help increase liquidity in a company’s shares.

ASX was the top-ranked exchange globally for the volume of follow-on capital offerings in 2022 with 1060. This was more than double the comparable volume on the Nasdaq exchange in the United States, more than triple the volume on the London Stock Exchange and was higher than any exchange in Asia-Pacific.

This is the third consecutive year that ASX has led global rankings for follow-on offerings by volume. By value of follow-on offerings, ASX was the fifth-ranked exchange globally in 2022. More follow-on capital was raised on ASX last year than on the London Stock Exchange or Hong Kong Stock Exchange.

Some industries were hit hard through the pandemic and needed to raise finance to shore up their balance sheets and get through, but Harrison says that other raises were more opportunistic.

“For example, a company might have taken the opportunity to raise capital for an acquisition of a company at a good valuation compared to in 2021 when valuations were very high,” he says.

Blair Harrison

Blair Harrison is the Head of New Zealand Listings at the Australian Securities Exchange (ASX) and heads the ASX New Zealand office, based in Auckland.

Capital Markets: Reshaping the financial markets for the next generation

Two emerging leaders in the capital markets speak to the Herald about their careers, the challenges women face in the sector, and what can be done to promote greater diversity and inclusivity.

Daniela Bossard

Daniela Bossard is an investment director at Rangatira Investments, a leading long-term investor in private New Zealand businesses.

In her role, she is responsible for assessing new investment opportunities and ensuring they align with Rangatira Investment’s core investment principles.

This involves identifying and evaluating potential investments, conducting due diligence, and presenting investment recommendations to the board. Additionally, Bossard works closely with existing portfolio companies to help them achieve their growth objectives. As a long-term investor, Rangatira Investment takes a partnership approach with its portfolio companies, working collaboratively to achieve its shared objectives.

She says it is a rewarding position that allows her to make a meaningful contribution to the growth and success of New Zealand businesses.

Bossard’s interest in the financial markets sector started at a young age, which led her to study finance and economics at the University of Auckland.

She started her career in investment banking, working closely with founders, senior management teams, and boards on potential acquisitions and divestments.

Bossard hopes to contribute meaningfully to investment outcomes that benefit Rangatira’s shareholder base. She is proud that around 60 per cent of its shareholders are charities or charitable trusts, allowing her to make a positive impact on New Zealand’s wider communities while leveraging her core skill set.

Bossard says one of the biggest challenges facing women in the sector is a lack of visibility and representation. She explains that this has a twofold effect: firstly, younger women have limited access to female role models, making it harder for them to envision themselves in leadership positions. Secondly, when there are so few women in leadership roles, they may be seen as tokens, putting undue pressure on them to be perfect and potentially stifling their leadership styles.

She says tackling this issue is not easy, but it is essential, and while the sector has grown its focus on promoting diversity and inclusion, further changes are required to address inequitable outcomes.

Bossard says Rangatira is committed to promoting diversity and inclusion at all levels of its portfolio companies, and discloses its efforts to achieve gender balance in its annual report.

By working together to promote diversity and inclusivity in the sector, Bossard believes a more equitable and thriving industry can be created that will benefit everyone.

Kate Le Quesne

Kate Le Quesne is the director of prudential policy at the Reserve Bank of New Zealand — Te Pūtea Matua. She leads the teams responsible for writing and reviewing the prudential rules that deposit takers, insurers and financial markets infrastructure must meet.

Le Quesne says she fell into financial markets “almost by accident”, having studied actuarial science. She became excited following the economic environment in real-time, which took her through a range of institutional banking roles in Australia, New Zealand and London.

More recently, she joined the public sector, where she found an array of roles that need specialist technical finance skills alongside a broad range of other skills — particularly good leadership.

She says she has been lucky in the Reserve Bank to have roles spanning both financial markets and financial stability, both critical areas to the functioning of our financial system.

Le Quesne was chairwoman of Young Women in Finance in Wellington for three years, which she says was a fantastic way to build a network with the shared goal of raising awareness around issues that matter to young women coming through the industry, to build support and awareness more broadly and to showcase some great role models.

She is keen to help mentor the next generation of leaders in the financial sector, acknowledging that in her own career, she has been lucky to have people who have been instrumental in helping her seek new opportunities and build confidence.

But she says it is still a challenge since there are fewer women in senior roles within the sector.

This means there are fewer role models and fewer of the benefits that come with a diverse set of leaders.

Le Quesne says the sector can drive change as it brings through the next generation, ensuring it puts unconscious bias aside to attract and retain a broader, more diverse workforce and ensuring organisations value diversity, inclusion and a range of skill sets, experience and backgrounds.

Project Auckland panel: Simon Bridges, Viv Beck & Mark Thomas

Project Auckland panel: Simon Bridges, Viv Beck & Mark Thomas

NZ Herald’s Tim McCready leads Heart of the City CEO, Viv Beck, Auckland Chamber CEO, Simon Bridges and Committee for Auckland Director, Mark Thomas in a discussion on the pain points plaguing Auckland’s infrastructure.

Project Auckland: Lessons come flooding in from three Auckland councillors

Project Auckland: Cyclone and flood deluge brings ‘a wake-up call’

Project Auckland: Opportunity costs lie in flood and cyclone response


Project Auckland: Opportunity costs lie in flood and cyclone response

Project Auckland: International cities show how to soak up stormwater

Project Auckland: International cities show how to soak up stormwater

In 2015, China implemented a concept known as “sponge cities” in 16 urban areas to combat flooding caused by stormwater.

The initiative was in response to the devastating Beijing flood in 2012, which claimed 79 lives and prompted authorities to make sponge cities a nationwide policy.

The idea was promoted by Chinese landscape architect Yu Kongjian, who advocated for the integration of nature’s ability to absorb, store and filter water into city infrastructure to mitigate against runoff.

This approach involves using green infrastructure to allow water to follow its natural channels, with streams and creeks uncovered, parks and grasslands restored, and planting used to slow down the flow of water and enable natural absorption, infiltration and purification. This is in stark contrast to the conventional grey infrastructure solution that speeds up the flow of water using pipes and drains.

Qunli stormwater park, in the northern Chinese city of Harbin, is an example of the concept. The park collects, filters and stores stormwater, and has become a popular urban amenity for recreational use. Capable of retaining and filtering up to 500,000 cubic metres of stormwater, the park has solved the stormwater inundation issue for an area 10 times its size, spanning over three kilometres.

Auckland Council Panel: Deputy Mayor Desley Simpson, Josephine Bartley & Julie Fairey

I had the fun job last night of moderating a panel with Auckland’s Deputy Mayor Desley Simpson and Councillors Josephine Bartley and Julie Fairey for the Onehunga Business Association. It was a wide-ranging conversation covering the budget, flooding, transport, rates, congestion, bus cancellations… But a couple of things stood out to me:

1. These three Councillors, while covering the full political spectrum, have each other’s backs and want to support each other – this was evident right throughout the panel discussion.
2. The recent weather events had a significant impact on them. They knew the people who lost their lives and were open about how these deaths affected them.
3. My final question to the panel was to ask for something positive for the year ahead. It’s nice to remind ourselves that not everything is bleak all the time!
4. Deputy Mayor Desley Simpson does a fantastic ghost impersonation (hear it between 1.01 -1:23) 👻 👻

Listen via Onehunga FM’s ‘Too Much Talk’ podcast in the link below


Asian Financial Forum: Optimism in Hong Kong despite economic outlook (NZ Herald)

Asian Financial Forum: Optimism in Hong Kong despite economic outlook (NZ Herald)

While the economy faces a challenging year, China’s reopening is a source of cautious positivity

Despite the International Monetary Fund’s (IMF) projected slowdown of growth this year to 2.7 per cent from 3.2 per cent in 2022 and its suggestion of an outlook fraught with uncertainty, the recent reopening of China resulted in an upbeat mood at the Asian Financial Forum (AFF) in Hong Kong this week.

The high-powered forum included keynote speeches from Helen Clark and former UN Secretary-General Ban Ki-moon, and brought together some 2000 delegates including politicians and policymakers, global financial and business leaders, investors and entrepreneurs from over 70 countries and regions. It was the first in-person gathering for the event after being held in a virtual format for the past two years.

Opening the Summit, Hong Kong’s chief executive John Lee acknowledged the global challenges but said the timing of the forum – just three days after resumption of quarantine-free travel to and from mainland China – provided a source of optimism.

Asian stocks traded higher following the resumption of quarantine-free travel and the end of China’s zero-Covid policy, and delegates shared this bullish view at the AFF.

When polled on expectations of the global economy in 2023, some 69 per cent said they were either optimistic or neutral. Just 31 per cent responded with a negative sentiment about the year ahead.

Chair of HSBC Holdings, Mark Tucker, said China’s reopening and the package of measures it is introducing to stabilise the weakened property market will be positive for both its own economy and the global economy more broadly, albeit with ongoing volatility and challenges associated with the escalation in Covid-19 cases.

“Hong Kong and the Greater Bay Area are likely to be the immediate beneficiaries from the mainland reopening,” said Tucker, expecting a strong recovery to be seen from the second quarter.

Even more significantly, it could potentially be the stimulus on which the global outlook for which 2023 depends on.

Tucker was enthusiastic that Asia was resilient, and had prospects for a strong rebound later in the year.

“We have seen virtually all economies in the region now recovered from the output losses incurred during the pandemic to above 2019 levels,” he said.

He highlighted that India too had become a hugely attractive market within Asia, with a strong long-term outlook, supported by the demographic dividend provided by having over two-thirds of its population of working age, along with important reforms and rapid developments in the digital economy coupled with global supply chain shifts.

“This could be the basis for a 20-30 year runway for growth, as was the case for China in the 1990s,” he said. “The same is still true of Singapore and across many Asean markets more generally.”

In contrast, he said a recession is widely expected in the United Kingdom and the EU with challenges from high inflation driven in part by higher energy prices and the war in Ukraine. Both are contributing to a cost-of-living crisis and squeeze on real incomes.

“The US economy is proving more resilient than those in Europe, and I don’t expect a hard landing,” he said. “I expect any US recession to be much shallower than those in Europe.”

“All of this means I am more optimistic about the second half of 2023. I expect inflation to slowly come under control. The markets are hoping that rates peak in the first half of the year so that any recession is shallow, regionally limited and resolved quickly.”

Chair of Agricultural Bank of China – one of China’s ‘big four’ banks – Gu Shu, shared this encouraging position, telling the forum the US is now facing lighter inflationary pressure, and inflation in the eurozone is expected to peak later this year.

“The need to continue raising interest rates weakens,” he said. “We estimate that in 2023, the pace of interest rate hikes will slow down.

“However, with rising food prices and a shortage in labour supply, the high current interest rates and tight monetary policy is likely to continue for some time.”

Navigating the polycrisis

The forum included a focus on how countries and financial institutions can tackle the looming polycrisis – a term coined to describe the multiple interrelated economic, political, and ecological shocks upending the global economy.

Panellists stressed it will be essential to work closely together to navigate the polycrisis, especially due to the many global issues that will need closer cooperation among countries to solve including the food, energy and cost of living crises, supply chains, climate change and the ongoing pandemic.

Luxembourg’s Finance Minister Yuriko Backes told the forum that while Covid tested the limits of globalisation and exposed several weaknesses, particularly in supply chains, the wrong conclusion for countries to draw from the crisis would be that we need a general decoupling from other economies.

“There is a worrying wider trend toward deglobalisation and protectionism in Europe and also elsewhere, and it is therefore important that efforts to increase autonomy do not translate into widespread market and technology fragmentation.”

Protectionism risk

Backes said there is a risk Europe’s open strategic autonomy, China’s dual circulation strategy which also aims to increase self-reliance, or the ‘Buy America’ rules introduced in the US could lead to a collective decoupling of markets and increased protectionism.

In Asia, multilateralism is on the rise. The world’s largest free trade deaL the Regional Comprehensive Economic Partnership (RCEP) between Asia-Pacific nations including New Zealand, has just reached its first anniversary in force and continues to grow to reach its full potential.

But Antony Leung, group chair of Hong Kong conglomerate Nan Fung Group, said the elephant in the room is the ongoing rivalry between the United States and China, which brings with it trade protectionism and puts wider global cooperation at risk.

“As a result, we are seeing that the world may be facing ‘one world, two systems’ – one being the US-European system, and then the rest of the world,” he said.

-Tim McCready was a guest of the Asian Financial Forum