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A “Mighty River” drives interest in shares

Australians know that, sometimes, buying shares in a formerly government-owned entity can be lucrative. Consider the returns since Commonwealth Bank’s (ASX: CBA) float. The first batch of CBA shares became available in 1991 at $5.40. Today, the shares are nudging $70. That’s to say nothing of the dividend payments shareholders have received during this time.

So perhaps it’s no wonder that some 330,000 New Zealanders have already pre-registered to buy shares in Mighty River Power ahead of its partial listing this coming May. Up to 49% of Mighty River shares will be sold to investors in total, while the New Zealand government will retain at least a 51% interest.

Record public interest in Mighty River float

This massive public interest has already broken records, exceeding Contact Energy’s (NZX: CEN) 1999 float, which saw some 250,000 pre-registrations. Mighty River’s pre-registration is still open for another week yet, so may grow from here. Of course, the investment statement and prospectus have not yet been released, so it’s not certain how many of those who’ve pre-registered will follow through and buy shares.

In the case of Contact Energy, about 230,000 of those who pre-registered did buy shares, and their return, had they held the shares until today, would be in the range of 75%. It’s not just Kiwis holding the shares. Today, Contact Energy is 53% owned by ASX-listed giant Origin Energy (ASX: ORG).

A parallel trend in the ASX

Some analysts and asset managers have speculated that the high level of enthusiasm — on both sides of the Tasman — in investing in marquee-name shares is down to the low interest rates on term deposits. While term deposit rates have dipped over the last year in Australia, for instance, the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has shot past the 5,000 mark, rising some 20% in the last twelve months. So-called blue chip shares, like those of Woolworths (ASX: WOW) and Wesfarmers (ASX: WES) have done even better, packing on 40% and nearly 50% respectively over the same period.

This booming optimism in the share market defies the relatively modest economic growth forecast by the Reserve Bank of Australia. Yet as The Australian reported today, commenting on the February jobs report, “The strongest jobs growth in more than a decade has contradicted Reserve Bank forecasts of rising unemployment and a softening economy.”

The Australian Financial Review says “good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit.” Get “3 Stocks for the Great Dividend Boom” in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading 

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Catherine Baab-Muguira does not own shares in any of the companies mentioned in this article.

 

 

 

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