A capital market is a marketplace where the public can buy or sell a range of different investments such as bonds, debt and shares. For example, stock exchanges like the NZX are a ‘capital market’. Many people might think of stock traders when they think about Capital Markets, but the reality is much more important. They provide a platform for businesses to raise funds by offering shares or debt for people to invest in. It connects people with money to invest, with businesses who need capital. There are many reasons why businesses will seek this capital investment but typically it’s to fund innovation and growth.
The ability for businesses to be able to raise funds for development drives the overall growth of the economy which benefits everyone. Another benefit for the public is having a platform to encourage that connection between the average Kiwi and businesses making investing so much more accessible. People have a range of businesses they can invest in to spread their savings and businesses have a way to pitch their opportunity directly to people who have money they want to invest. It’s a win-win!
The recent listing of Napier Port on the NZ Stock Exchange is a great example that highlights the benefits of capital markets. Napier Port need a new wharf to continue to ship the growing number of NZ exports to the world. This wharf is going to cost roughly $200 million – a sum of money that is well beyond anything the Napier Council and ratepayers can afford, so they listed on the stock exchange to raise the funds so the public could invest alongside Napier Council. There was a lot of support for Napier Port’s listing and the demand for shares in the company was high, including from Napier locals.
Booster’s funds also supported Napier Port. Although providing capital to build the new wharf is great for the port, for us as your fund provider, it also has to stack up from an investment point of view to make sure we are investing prudently on your behalf. To do this, we conduct hours of research, including visiting the port and meeting with management, to make sure it fits the bill as a “good investment” for our research team. Thankfully, this hard work has been paying off so far. Interest in Napier Port’s shares has been strong, and the value of the shares has increased 18% since we first invested in, in August this year.
September’s share market investment results bounced back and are looking better than August. This was helped by US lowering their interest rates which made their share market look more attractive for investment. Also, the value of the NZ dollar continued to drop after the NZ Official Cash Rate was reduced last month. A lower NZ dollar supports NZ exporters and make the returns from our overseas investments more valuable.
We are also looking outside of the share markets for opportunities to add other sources of returns for our members. This month we added another unlisted land investment to our Private Land & Property Portfolio by purchasing a large kiwifruit orchard in Northland. The Private Land & Property Fund invests into our wholesale fund which holds the land investments directly. We have continued our partnership approach with the orchard being leased to Seeka, who will develop and manage the Kiwifruit orchard. This provides another investment return opportunity to our members, especially while current low interest rates are making things like term-deposits less appealing.
For other funds we manage, we have made small additions to our global shares sectors by investing into European companies that provide construction materials. Europe has had lower than expected funding into public infrastructure for over a decade. With European exports starting to slow down, this presents a great opportunity for governments to increase funding to these infrastructure areas and inject a boost back into their economies.