Trio of Exchanges Dominates New-Market Listings

MEDIA RELEASE 17 AUGUST 2006

Mega Trio of Exchanges Dominates New-Market Listings

- Increased appetite for dual listings
- Asia Pacific markets the most liquid
- New Zealand shows growth

Growth markets continue to offer favourable conditions for fledgling and high growth companies, with global new-markets supporting companies with a combined market capitalisation of US$4,222bn during 2005.

The New Zealand Alternative Market (NZAX) is among those showing growth, with the number of companies, total market capitalisation, and average market capitalisation by company all improving during 2005, according to the 2006 Global New Markets Guide (Insight into International Capital Markets) released by accountancy and business advisers Grant Thornton.

But the NZAX still trails well behind both the SESDAQ (Singapore) and MESDAQ (Malaysia) new-markets on the number of companies and market capitalisation, although it has caught up with Singapore on average market capitalisation by company (see Table A).

"There is encouraging news in the improvement in the NZAX," says Brendan Lyne of Auckland, who heads the corporate finance division for Grant Thornton New Zealand.

He notes that despite the fact that in New Zealand there is increasing interest in offshore exchanges, particularly AIM, there is still room for local exchanges such as NZAX and even for the price discovery platform offered by Unlisted.

"It is a feature of globalisation that capital markets also are becoming increasingly international but, despite this fact, local new-markets have a role to play for reasons such as cost, ease of access and scale of investment. Offshore markets can potentially offer higher valuation and greater liquidity but typically only if the listing is of an appropriate size and has an international presence. Not only is there competition between markets but also competition between alternative sources of capital such as private equity."

Table A: NEW-MARKETS COMPARISON
|----------+-----------+----------+----------+-----------+----------+----------|
| | |31.12.04 | | |31.12.05 | |
|----------+-----------+----------+----------+-----------+----------+----------|
| Market | Number of | Total | Average | Number of | Total | Average |
| | companies | market | market | companies | market | market |
| | | cap (US$)| cap by | | cap (US$)| cap by |
| | | | co. | | | co. |
|----------+-----------+----------+----------+-----------+----------+----------|
| SESDAQ |163 | 3,550m | 30m | 171 | 3,600m | 20m |
|----------+-----------+----------+----------+-----------+----------+----------|
| MESDAQ | 63 | 1,760m | 30m | 46 | 2,110m | 50m |
|----------+-----------+----------+----------+-----------+----------+----------|
| NZAX | 22 | 340m | 10m | 25 | 430m | 20m |
|----------+-----------+----------+----------+-----------+----------+----------|

The Grant Thornton guide says the past three years has seen clear blue water separate NASDAQ (United States), TSX-V (Canada) and AIM (UK) from other new markets in terms of companies listed.

Despite a decline in year-on-year growth, NASDAQ continued its three-year lead with 3,187 companies listed in 2005, while TSX-V witnessed an increase of 2%. AIM grew by 41%, with 1,232 companies listed and can be seen as one of the star performers of the year. Steady year-on-year growth has also been recorded for Korea's KOSDAQ and elsewhere in the Asia Pacific region Singapore's SESDAQ supported 167 companies - an increase of 13% on 2004.

Brendan Lyne says: "We are now seeing a jostling for position in the world's global new markets. The consolidation story played out in the international capital markets is now running in new markets. Each is seeking to attract premium listings and NASDAQ, AIM and TSX-V are setting a steady pace to follow."

Dual listings become more widespread

New markets, once deemed of primary significance to locally-based smaller and mid cap companies, are now increasingly attractive to international investors. Some companies are driven by poor liquidity in home markets, others seek the opportunity to gain access to a larger investor base with a larger pool of capital available for investment, while some are attracted to the regulatory structure of international markets. Certainly AIM has been particularly successful in this regard and achieved a staggering 73% year-on-year increase in market capitalisation (US$78bn 2005: US$45bn 2004).

Market liquidity

The Asian exchanges of KOSDAQ and Mothers Market (Japan) led the charge for market liquidity, recording a significant 75% and 39% respectively for turnover of shares as a percentage of total market capitalisation. For others though, markets have been persistently illiquid. SESDAQ saw liquidity decline for the third year running, as did Hong Kong's GEM.

The onward march of China is, however, not affecting the main exchanges and the Hong Kong Stock Exchange, one of the top ten exchanges in the world in terms of market capitalisation and funds raised, continues its prosperous growth. Market capitalisation has grown from US$460bn in January 2003 to US$1,260bn in June 2006. Total funds raised through initial public offerings and the secondary market have increased from US$27bn for 2003 to US$39bn in 2005.

Brendan Lyne continues: "China has enjoyed uninterrupted and phenomenal economic growth in the past few years. For the first six months of 2006, total funds raised on the Hong Kong Stock Exchange reached US$23bn, of which GEM accounted for US$828m. India too is enjoying the regional upswing and capitalisation on the National Stock Exchange has increased a phenomenal 152% over two years to stand at US$667bn. Results in both countries are buoyed by substantial international interest and this looks set to continue throughout 2006."

ENDS

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