Scott St John on New Zealand equities | First NZ Capital | Video
World Finance interviews Scott St John, MD and CEO of First NZ Capital, on the current mood in the New Zealand equities space
Scott St John has already told us how the New Zealand equity markets were reinvigorated by the Capital Markets Taskforce, established in 2008. We talk to him again to get more detail on First NZ Capital’s view of the New Zealand equity market today, as well as its partnerships with Credit Suisse, and its exploration of the Australian equities space.
World Finance: You have quite a significant market share within New Zealand, so tell us about the mood within the New Zealand equity market?
Scott St John: The mood in New Zealand is good, and in saying that I infer no complacency. But New Zealand is somewhat out of sync with parts of the rest of the world. We don’t have government debt at a very very high level, we have an economy that is recovering, albeit gradually, but genuinely recovering, and has been for a little while now, and is forecast to continue to recover for a number of years.
So, we have a backdrop for corporates that is actually quite positive. And so what we are seeing is, our corporates are moving on to the front foot, to use an English vernacular. And they’re employing, they’re raising capital, and they’re expanding.
“In the New Zealand business we have been strategically aligned to Credit Suisse Australia for well over 20 years”
World Finance: You’re also expanding into Australia. Why Australia, how does that market compare?
Scott St John: The proximity of Australia to New Zealand is helpful. In our own business, be it our wholesale clients or our wealth clients, all of those portfolios have a large proportion of Australian stocks within them, and as a consequence we feel very very familiar with Australia.
Also we have our joint venture partners in Australia: Credit Suisse. In the New Zealand business we have been strategically aligned to Credit Suisse Australia for well over 20 years. And as a consequence of that, there are very very high levels of contact. We have been talking for some time with them about the evolution of their market, the evolution of how global investment banks are changing shape and changing their coverage models, and you know, everyone, I think, is familiar with elements of that. The higher compliance costs, the higher capital costs, and the counter-balancing contraction and headcount. And from our perspective, what we are seeing is opportunity around the periphery of those markets as coverage contracts. We see opportunity to enter that market and fill some of the voids that are being created. Where that might lead you is, what does your experience in New Zealand lend?
And if you break up the Australian market, perhaps you might look at the top 100 stocks over there and say, well look: those companies are possibly globally relevant, but the rest of the market is probably locally relevant. And if you line that locally relevant segment up against New Zealand, they look very very similar. You know, the very very large stocks in the ASX100, generally execution is increasingly via machines, whereas those smaller companies rely on the human hand to execute. That’s where we deploy a lot of effort in New Zealand, and we think we can lend that experience to Australia.
World Finance: You’ve already mentioned Credit Suisse, tell me how important this partnership is, and what do they actually bring to the table?
Scott St John: Effectively our business started doing cross-border transactions and formed a relationship with Credit Suisse, which has been enduring, and it endures essentially because of the trust that sits between the people within the organisation.
The last formal review of the relationship took place in 2002, where we documented a strategic alliance. Now, I don’t believe that strategic alliance document has seen the light of day since then, and that’s testimony to the relationship.
The global CEO of Credit Suisse, Brady Dougan, sat on our board in New Zealand a number of years ago, and relationships like that just foster a very very strong camaraderie between the groups. We are Credit Suisse’s franchise in New Zealand.
“If you line Australia’s locally relevant segment up against New Zealand, they look very very similar”
World Finance: What trends do you see affecting the capital markets in either jurisdiction?
Scott St John: A major trend is going to be influence by how the global banks define their coverage models. And, you know, all of them have reduce their headcount. It’s unambiguous. And that job may in fact not be complete. My sense is that what you will see emerging are very very strong regional franchises that are stepping into the breach of the opportunities that are perhaps not as efficiently covered by the global banks as they reshape. And we intend to be part of that.
World Finance: And finally, what’s next for First NZ Capital?
Scott St John: We’ve got our hands pretty full with Australia, probably for the next couple of years. All going well, if we do a great job there, then maybe other opportunities will follow.
World Finance: Scott, thank you.
Scott St John: Thank you.