ASX, NZSE merger under a cloud
Demutualisation of the New Zealand Stock Exchange has taken a major step forward, but enthusiasm for a merger with the Australian Stock Exchange appears to have waned.
Wellington Central MP Marian Hobbs has paved the way for a show down on the future of the NZSE by offering to sponsor a bill that would allow the exchange to demutualise.
The New Zealand Stock Exchange Restructuring plan is likely to be introduced to Parliament in February and it is expected to be passed into law three or four months later. At this stage, it appears to have the support of the two major parties, Labour and National, so its passage looks assured.
Once passed 75 per cent of the exchange's 274 members have to approve demutualisation. Should they do that they will reap a windfall profit.
There appears to be general support for the demutualisation process, but that what happens next is unknown.
The NZSE planned to make an announcement about its planned marriage with the ASX before Christmas, but that announcement has been delayed because more work still needed to be done.
Currently the broking community appears evenly divided on the merger issue, as do many fund managers. Clearly brokers are waiting for the NZSE to provide them with more detail on the benefits of a merger, and why it should happen.
One of the issues is that although demutualisation is a necessary step to a merger, it is a separate process in itself.
Opposition finance spokesman Bill English says demutualisation as an end in itself would be preferable to a merger.
"We'd prefer to see demutualisation as a step forward for the NZSE rather than the final act of a dying market.
"It's not at all clear that what effectively mounts to a takeover by the ASX will make it easier for local companies to raise capital."
Questions have also been raised about the unique characteristics of the NZSE and whether they would be maintained in a merged entity.
One rumour circulating the market last year had it that the ASX wanted to agree on a price for the NZSE exchange without guaranteeing ongoing roles for parts of the local market, such as the new capital market for emerging companies.
AUTHOR
Phil Macalister
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