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US investment giants spend up in telco share flip-flop

By Michele Simpson

Friday 6th October 2000

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Giant US fund manager Franklin Resources is leading the international charge to pick up Telecom shares at what it sees as a bargain price.

Last month Franklin increased its holding in Telecom to just over 7% and brokers expect it may continue its run of buying up Telecom shares started in May when it had 5% and lifted it to 6.04%.

Another large US fund manager, Brandes, notified the Stock Exchange on Tuesday it was increasing its Telecom shareholding from 7.6% to 8.7%. On Tuesday Telecom's share price stood at $5.95 and following the report into the telecommunications inquiry released on Wednesday fell to about $5.53.

In the past year $US50 billion investor Franklin has baffled some brokers. It has sold significant amounts of Fletcher letter stock shares including a major stake in Fletcher Paper for $1.30-$1.40 a share last last year when it could have waited until the Norske Skog deal was done and got $2.50 per share.

Deutsche Securities analyst Stephen Toplis said New Zealand had some cheap buys for offshore firms which could come in and take sizeable chunks in local listed companies.

The falling kiwi dollar at about 40USc was another sweetener to get them equity shopping.

But in order for more investors to start buying Telecom shares the dollar needed to strengthen and the global telecommunications sector had to turn around, he said.

"Then we need to see Telecom perform adequately within that framework."

Other brokers agreed, saying offshore investors saw the Telecom stock as undervalued.

Mr Toplis said recent Deutsche Bank research showed telecommunications stocks had been oversold globally.

Earlier this year Franklin moved out of Brierley Investments and cashed up $10 million of its shareholding in Air New Zealand.

It has rapidly shrunk its Carter Holt Harvey portfolio, dropping its stake from 9.26% in July to 6.14% last week.

One broker said it was well known Franklin Resources was desperately trying to offload more of its stake but there were no buyers.

Franklin has also dropped its stake in Fletcher Forests from 6.4% to 4.96% this year and in Fletcher Building from nearly 11.5% to 7.0%. Franklin's shares in Fletcher Energy were cut back to under 5% in the past month.

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