New Zealand's rating as an investment destination could be boosted this year, partly thanks to Australasia coming through the global financial crisis so well.

Fiona Mackenzie, Head of Traded Products and Liquidity at NZX, says in contrast to other markets, New Zealand’s listed – and regulated – financial sector has weathered the downturn extremely well, with no company failures that have cost investors.

“Our listed, equity and debt sectors are all functioning very well and there have been no bank failures in Australasia. Compare that to the United States, where nine banks have failed already this year.”

Mackenzie returned to New Zealand in early 2009 after more than a decade working in US equity markets. She was struck by the different feel she found on her homecoming.

“Of course the global melt-down had a big impact but New Zealand survived it well. Our house is in order and we can be externally focused again. That’s in stark contrast to many economies which continue to grapple with fall-out from the financial crisis.”

Open for Business
New Zealand’s attractiveness as an investment destination will be touted to potential investors from Australasia, Asia and further afield when the first ever New Zealand-Australia Investment Forum takes place in Auckland in March.

Co-hosted by Investment New Zealand and its trans-Tasman counterpart Austrade, the event is designed to give investors a first-hand look at investment opportunities in post-recession Australasia.

It’s part of a wider drive, says Investment New Zealand Director Graham Matthews, to up New Zealand’s desirability as an investment destination.

“New Zealand under performs in investment markets because we haven’t positioned ourselves well. We’ve done a fantastic job of marketing ourselves as a premium tourism destination but haven’t yet matched that in an investment context.

“International investors haven’t disappeared and they’re looking for new opportunities. New Zealand and Australia have a significant advantage at the moment, through the vibrancy and stability of our financial sectors. The message is that we are very much open for business.”

Matthews says New Zealand’s pitch is threefold: "The first challenge is to get the country on investors’ radars. They might see New Zealand as a holiday destination but few believe we have any bearing on their investment portfolio."

Advantages like New Zealand’s high global ranking for ease of doing business and stable legal and political systems make a difference, says Matthews, but aren’t enough on their own. Incentives are also important, an area where New Zealand has traditionally been ‘light’ compared with many bigger economies.

“Investors also need a specific deal that’s relevant to them,” says Matthews.

“We are working, for example, with some Chinese investors that are interested in New Zealand’s iron sands. It’s not an obvious match but when we get down to the details there are good synergies. Plenty of strong investment opportunities like that do exist.”

Sector Opportunities
Matthews is quick to list five top areas of investment opportunity in New Zealand – food, fibre, infrastructure, biotechnology and clean technologies.

"Food and fibre build on our traditional strengths – we lead the world in producing both and we also have expertise in food security. That’s going to grow in importance as the effects of climate change are felt across the world.”

He says New Zealand’s unique environment and geographical isolation make us sought after for biotechnology initiatives, while clean technology is an emerging area of capability.

“Already almost a third of the total energy consumed in New Zealand already comes from renewable sources. The fact that we can offer effective, low carbon sources is very attractive internationally.”

Infrastructure projects are a proven way of stimulating economies and a number are on the drawing board in New Zealand. Some of these are likely to be funded through public-private partnerships.

New Zealand company Morrison & Co launched the Public Infrastructure Partnership (PIP) fund last year with the New Zealand Superannuation Fund becoming the cornerstone investor.

Other institutional investors are being sought and individual investors can also participate through a sub-fund to be marketed by Craigs Investment Partners.

Investments will be made in social infrastructure such as schools, prisons, student accommodation and hospitals, with the private sector typically designing, building, maintaining and financing assets under a long term contract with central or local government.

Peter Coman, Managing Director of the PIP Fund, says the model has been proven internationally and will provide an alternative source of funds for developments that the Government may not wish to pay for itself through traditional procurement models.

He says the fund is attractive for those wanting to diversify their portfolio with comparatively low risk, longer term investments.

“It’s a new product with potential for early movers to achieve good returns. It’s also attractive given the recent turbulence in equity and credit markets.”
Coman says there has been particular interest from Australian funds keen to gain a footing in New Zealand.

New Products
Introducing new products that will ensure New Zealand’s financial market stacks up well against the competition is a focus for NZX says Fiona Mackenzie.

“In bigger markets investors have a multitude of ways to navigate the investment scene. New Zealand does not and never will have a full suite of products. But what we can do is focus on areas of competitive advantage and do them really well.”

Initiatives planned over the next year include the introduction of equity options, index futures and the launch, in June, of a unique whole milk powder market.

Mackenzie says the dairy derivatives market offers the first ever opportunity to hedge dairy price risk.

“Dairy has been the one soft commodity without a risk management tool. We’re getting interest from independent software vendors through to brokers in Chicago and Singapore and big international purchasers and processors of whole milk.

She says as well as bringing new investors to New Zealand, the initiative will bring new opportunities to New Zealand brokers and help to protect New Zealand’s economy from volatility in dairy prices.

The New Zealand-Australia Investment Forum takes place from 10^th – 11^th March.