NZSE indices get early holiday

The New Zealand Stock Exchange has put back the date for introducing its new indices from the end of this year to February next year.

It says the plans for new indices have attracted "a significant amount of feedback" and it acknowledges changes need to be made.

Under its proposals the exchange intends to abandon the benchmark NZSE-40 and NZSE-30 capital indices, and replace them with a free-float-based and expanded NZSE-50 index.

One of the contentious plans has been to have the indices reported in gross terms rather than capital ones.

It says the decision to delay the change has been made to ensure the following market issues are adequately addressed:

1. Liquidity – Under the current proposal, a number of companies have been identified with the requisite free float allocation but with low investibility due to infrequent trading. This is mainly due to major strategic stakeholdings. "As a consequence, we will be reviewing the parameters for our liquidity criteria further," the exchange says.
2. Reviewing free float adjustment – Adjustments may be required to create flexibility for certain companies which have sufficient liquidity, but who don’t quite reach the proposed $1 billion free float.

The exchange says that considerable deliberation is still needed to resolve these important market concerns.

The NZSE also recognizes the disruption that might be created for brokers and major institutions at the end of the quarter, when the rebalancing of portfolios may be required, if the new indices are introduced as proposed on 31 December 2002. This is particularly true given it is the end of the December quarter, which is dominated by the holiday season.

"It’s important for us to balance the needs of all our stakeholders and this involves full assessment of each group’s concerns," says Geoff Brown, NZSE Market & Relationships Manager. "We will be reviewing the large amount of feedback received to ensure we’ve captured all views and will announce the new composition and rules early in the New Year."