6 Jun 2014

Listed equities' value rises

7:33 am on 6 June 2014

The share market's value in relation to the economy has doubled but that does not mean the battle to ensure the New Zealand Stock Exchange (NZX) is a viable institution has been won, an analyst says.

The value of the NZX is just under 40 percent of the economy - more than double its level at its low point in March 2009.

stock exchange

Photo: PHOTO NZ

Latest NZX figures show the value of all listed equities stood at just below $90 billion at the end of May, compared with about $75 billion in May last year.

Investment strategist Bernard Doyle said his firm, JB Ware, believed a share market needed to account for at least 50 percent of gross domestic product (GDP).

"There's no right measure but we've felt that over 50 is a very important starting point because at 50 percent of GDP, when you backward engineer what that might mean for things like market turnover, you start to generate somewhat healthy numbers in terms of liquidity," Mr Doyle said.

"Things like will you meet benchmark requirements for global investors to have an interest whatsoever in participating in our market?

"Importantly, as I think we're seeing this year, getting to around that closer to 50 percent of GDP level, you will see companies that are growing, and aspiring to grow, look to the sharemarket as a source to raise funds, which is really important when you're talking about longer term growth aspirations of an economy."

"It was important to have that avenue of raising risky capital via the share market, and when it was closer to 50 percent of GDP, more and more of that would occur "which is very healthy and pleasing to see", Mr Doyle said.