NZSE 50 (New Zealand Stock Index) Essay

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The NZSE 50 (also known as NZX 50) is the group of 50 top companies measured by free-float adjusted market capitalization listed on New Zealand’s stock exchange. According  to New Zealand  Exchange (NZX) guidelines, the free float is determined by excluding blocks of shares greater than 20 percent and blocks between 5 and 20 percent, which are considered strategic. The weights of corresponding stocks are determined on the basis of the resulting free-float market capitalization. This adjustment is considered to provide an index that closely reflects the main index because it is designed to represent the composition of stocks traded.

The NZX 50 is available as a total  return  and as a gross index indicator.  Companies  included  in this headline   index  are  among   the  nation’s  premium brands, long-established heritage companies, and several foreign firms. These companies—which include Telecom, Air New Zealand, Fisher & Paykel, and ING—are part of more than 200 companies that form NZX’s premier equities market, formerly known informally as the Main Board. Aspects of the old system  of indices  are  still present  in the  new  system and specifically the NZX 50. Thus, it is important to consider  the major changes in New Zealand’s stock exchange in general and development  of the  major indices in particular.

History Of NZX

Before 2002, NZX’s predecessor,  the  New Zealand Stock Exchange (NZSE), was a mutual  organization owned by its member  broking firms. This organization was the successor of the Stock Exchange Association of New Zealand and the Auckland, Wellington,  Christchurch-Invercargill, and  Dunedin Stock  Exchanges,  established  under  the  Sharebrokers Amendment Act of 1981. New Zealand’s Stock Exchange  became  a  public  company,  following its demutalization at the end of 2002 to a limited liability structure:  NZSE Ltd. Former  members  of NZSE were each issued 10,000 shares in the new company. This transition  became  official when  the  company changed its name to New Zealand Exchange Ltd. (NSX). In  turn,  the  NSX’s markets  were  renamed the  NZSX Market  (stock market),  the  NZAX Market (alternative market), and the NZDX Market (debt market). NZX began to trade and list securities on its main equity market, the NZSX, in June 2003. These changes placed the NZX in the dual position of being a listed company on its own exchange and regulating the conduct of the exchange.

Since the  middle  of 2005, the  NZX  Centre  has been located in the nation’s  capital city of Wellington, housed in the renovated Odlins Building on the waterfront. Other important developments that have shaped  New  Zealand’s stock  exchange  include  the move to a national computerized  screen trading system in June 1991, ending the open cry pit. Eight years later, this system was updated by the FASTER trading system, and in 2001, the internet-based eFaster facility was introduced,  allowing direct  online access to the market.

Before its introduction in November, the stock exchange’s trading hours were extended on September 1, 2001, to be in line with market trading in Australia and the United States.

Index System

Developments in the old index system influenced the new system, which still exhibits many of the features of the previous one. Until 2003, the NZSE 40, with a base value of 1,000 (as of July 1, 1986) was the most widely quoted  index of New Zealand  stock market prices.  Stocks  included  in  this  index  were  chosen based on their market capitalization, and the index’s composition  was reviewed quarterly.  A capital  and a gross index were calculated for this index, but the capital index was generally referred  to as the NZSE 40 index. From March 3, 2003, the NZSE 50 replaced the NZSE 40 and was later renamed the NZX 50 and NZX 40, reflecting changes in the name of the stock exchange company and its equities board.

Due to the high proportional representation of single companies in the index, Telecom in particular, the NZX 50 Portfolio  Index was introduced.  This index caps the weights for large companies in the NZX 50 to 5 percent of the index market capitalization. Both the NZX 50 and NZX 50 Portfolio indices’ base value were set at the NZSE 40 closing value on February 28, 2003.

In addition  to these  indices, the  NZSX 15 (now the  NZX 15) was launched  on February  9, 2004; it comprises  the  15 largest and  most  liquid domestic securities  listed  on  the  NZSX market.  Constituent companies are weighted by free-float market capitalization, but the weighting of any security in the index is capped at 30 percent.  This index has a base value of 3,000 as of October 1, 2001, and its composition  is reviewed every six months.

Focused Indices

The exchange has several focused indices, including the NZX SciTech Index, which highlights the performance of companies  with significant business interests  in  the  development  and  commercialization of new technologies, and the NZX 10 Index, which provides a measure of the price trends of New Zealand’s top 10 listed companies, excluding overseas stocks.

Other   indices—the   NZX   MidCap   Index,   the NZX SmallCap Index, and the NZX All Index—are also monitored to evaluate the performance  of New Zealand’s stock exchange market and constituent companies.


  1. Bowden and J. Zhu, Kiwicap: An Introduction to New Zealand Capital Markets (Kiwicap Research, 2005);
  2. Grant, Bulls, Bears & Elephants: A History of the New Zealand  Stock Exchange (Victoria University Press, 1997);
  3. King, The Penguin History of New Zealand (Penguin, 2003);
  4. NZX, New Zealand’s Stock Market, Stocks and Shares Web site, (cited March 2009).

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