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    T3 momentum pushes through for Telstra
    Email Print Normal font Large font Matt O'Sullivan, Sydney
    December 9, 2006

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    AdvertisementLONG accustomed to a downward trajectory, the performance of Telstra's ordinary shares and T3 receipts over the past three weeks has surprised even the most bullish of its 1.65 million shareholders.

    Retail investors have watched their investments in T3 gain almost 26 per cent since listing on November 20 in this country's second-biggest share offer.

    "It's an excellent gain. I thought they might have peaked at around $2.20 or $2.30 but they are enjoying a good run," said a T3 investor and self-funded retiree, Michael Baker of Taren Point in Sydney.

    The T3 receipts closed up 6¢ at $2.51 on Friday, making it one of the biggest winners on the ASX 200 index this week as it defied a flat market to gain more than 9 per cent.

    Telstra's ordinary shares have also risen more than 8 per cent over the last three weeks, despite the impact of 4.25 billion T3 shares hitting the market. Telstra closed up 5¢ at $3.93.

    Macquarie Equities private client adviser David Halliday said the stock could have risen due to some in the market believing that Telstra's management could be about to deliver a positive earnings update.

    "Sentiment globally for telcos has been changing but this (rise in Telstra's market value) is a pretty substantial move," he said. "It just smacks of an expectation of a positive outlook statement … to justify the sort of volumes and price movements we have seen."

    Telecom New Zealand has climbed 26 per cent from a record low in late August after taking a battering from the likelihood of a harsher regulatory environment. The stock broke back through the $4 mark on Friday for the first time in more than a month, closing up 12¢ at $4.05.

    At least three large brokers, including Macquarie Equities and Citigroup, have raised their recommendations for Telstra during the past three weeks.

    ABN Amro also changed its recommendation this week from "hold" to "buy" partly because it believed the telco's capital expenditure was "likely to … reduce substantially sooner than previously forecast", ABN Amro said.

    Investors Mutual, one of the five largest local institutional investors in Telstra, said Telstra was rising due to the market "just realising it's undervalued".

    "This stock has the potential to deliver good returns," Investors Mutual funds manager Jason Teh said on Friday. "Fair value is north of here."

    Argo Investments's managing director Rob Patterson said the change in the brokers' views of Telstra's outlook was likely to have given the stock some "momentum".

    "I imagine there are still fairly underweight positions out there (among local institutional investors) … (but) if you look at the short-term chart it's pushing the limits a bit at $4," he said.


    ■ T3 investments have gained almost 26 per cent.
    ■Telstra's ordinary shares up more than 8 per cent.
    ■ Analyst says: "Fair value is north of here
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