Forum Archive Index - February 2004

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Rockbottom,
 
>Snoopy wrote:
>
>>I tend to think of shares in their
>>'home market' currency.   Generally it will be the home market
>>investors that drive the share price.......................
>>
>>I predict that the exchange rate volatility between each side
>>of the Tasman will become less of an issue in the future for trans
>>tasman share owners.
> 
>The home market investors do drive the price to some extent. But 
don't
>forget most of Telecom is owned overseas. The relative exchange 
rates
>are affected by different things. ie the Oz/US trade pact,
>Droughts/floods in Oz or NZ, 
>

True the droughts/floods will have an effect because they affect a 
significant part of the tradable sector and it is unexpected.

However, I believe that trade in the normal course of business has 
almost no effect on currency volatility, because most of the 
exporters/importers will have hedged their currency requirements long 
ago.

>
>Govt policies re balancing books. This
>will lead to continuing fluctuations.
>

In the past yes, but not now.   NZ and Oz policies are pretty much on a 
par when it comes to balancing the books.

You have a point about TEL.NZ in particular, which is used by some 
overseas investors as a proxy for investing in the $NZ.     However if 
you take the long term view,  you can regard any currency trader 
trading in Telecom as noise about a fair value average.

> 
>>They often say history repeats itself, but taking into account the
>>more stable prospects for both TEL and TLS since the dot com 
boom I
>>am picking that it won't.   Given current company policy for both
>>TEL and TLS I see the price levels being very similar for both
>>shares over the next twelve months.    In other words not much 
scope
>>for traders to skip between the two any more.
> 
>Surely the major fluctuations are caused by the major players (who 
are
>probably in UK or US) needing to free up money or to invest. A recent
>example is Contact Energy's recent drop in share price.
>

I'll pass on that one.   I don't claim to be able to get my head around 
the workings of currency traders.    But I don't think the volatility in 
CEN.NZ is a currency play.    I think it is related to the institutions 
trying to decide whether Edison selling their shares will trigger a 
takeover bid , in which case Contact shares should be priced at a 
premium.  Or alternatively if Edison will split their share parcel up on 
sell to the institutions in which case Contact shares should be priced at 
a discount.   I don't think it is entirely clear exactly how the Edison 
contact shares will be disposed of, and it is this that is creating the 
volatility.

> 
>Another matter is the change in the Imputation/Franking rules. I am
>assuming that Telecom does not pay any tax in Aus. If so then there 
is
>unlikely to be increased demand from Australia for their shares. Am I
>right?
> 


Less demand from income chasing Aussies for Telecom shares, 
because AAPT is at best breaking even in Oz?   Yes, I think that sums 
up the picture.

Mind you, exactly the same thing applies here for NZ investors wanting 
a bit of the Telstra action.    I seriously doubt that Telstra is making any 
money in NZ, so no franking credits for NZ investors either.

SNOOPY



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