JBWere predicts capital flight
Saturday 20 Apr 2013 2:30 p.m.
JBWere has sent a strong message that it and other investors will flee the New Zealand stock market if the state intervention signalled by Labour and the Greens this week comes to pass.
"The steps the Labour/Greens are suggesting, if enacted, are significant enough for JBWere to consider a reduced allocation to the local share market," the firm which oversees $1 billion of client funds in the New Zealand share market said.
"We doubt we would be alone in making this judgment."
The Greens and Labour said on Thursday that they will set up a new agency to buy electricity to bring down power prices if there is a change of government at the 2014 election.
The move was condemned as a return to central planning and an attempt to ambush the partial privatisation of state-owned power companies by the Government, business leaders and commentators.
The price of utility companies listed on NZX plunged.
JBWere said the fall in the price of listed electricity companies had already reduced the savings of New Zealanders who hold $1.5b in Kiwisaver accounts which invest in shares.
The policy sent a worrying signal about the intentions of any future Labour/Greens government.
"The backbone of the New Zealand stock exchange is made up of companies that have regulatory exposure: Auckland Airport, Sky Television, Fletcher Building among them.
"The message from Labour/Greens to investors is that they will be giving little credence to the impact on corporate profitability in future regulatory decisions," JBWere said.
A layer of risk from state intervention would be a bridge too far for many investors.
"JBWere is a case in point, as support of the local market is important to us and our clients, but we can, and do, invest significant sums outside of this country."
JBWere said Labour built credibility in the 2000s with its efforts to rejuvenate New Zealand's capital markets, culminating in the Cullen fund and Kiwisaver.
"We believe the latest policy, as announced, will be an example of a vicious circle."