Get ready for asset sales

Mon, 05 Sep 2011 9:07a.m.

By Michael Wilson

Raid the piggy bank, sell your stamp collection, pawn your surplus gold jewellery and get ready for the Big State Asset Sell Off. The partial privatisations should prove to be a winner for investors and the more New Zealanders that get involved the better.

To make the asset sales a success the government will have to sell them at an attractive price. The first on the block will be crucial. It will have to be a sell out and the opening price on the stock market will need to show a solid premium. If people feel they have made 10-15% then they will probably apply for the next share float. Success will breed success.

And the asset sales should be an overall plus for the economy. I don’t usually favour asset sales as they invariably end up in foreign hands and effectively “cost” the economy as a big dividend stream flows offshore. So the sale of publicly owned assets like “BNZ”, “State Insurance” and “Post Office Savings Bank” saw ownership and dividend streams go 100% into offshore hands. The latest asset sales shows the government has learnt a thing or two. Keep majority ownership in government hands and encourage as many locals as possible to apply for shares.

The investment landscape has changed a lot since the asset sales in the 1980s and 1990s. We now have a huge NZ Superannuation Fund, numerous Kiwisaver funds and many iwi groups which are cashed up. These three potential buyers could purchase and effectively lock up big chunks of the shares on offer.

In addition the typical investors who for years shied away from the share market because they thought it too risky and instead opted to put their money into “safe” finance companies, have had a massive change of attitude. They now realise, to their cost, that finance companies were a complete sham and in fact were highly risky and run by incompetent or criminal shucksters. That industry is effectively dead. If investors had only looked to the sharemarket for “safe and solid’ investments like Trustpower, Contact or Vector, they would still have their money and they would have been able to earn an annual dividend of 5-7% every year. Energy companies like these also provide capital gains over time so they are a perfect investment for those who want a reasonable income stream and the prospect of a rising share price.

Most of the new round of asset sales will be utility companies like Meridian, Mighty River Power and Genesis. The demand for energy is on a constant uptrend and these companies earn solid and reliable incomes every year. They can fill the gap left by those now defunct finance companies.

So get your finances ready and help keep these asset sales in New Zealand hands. It should prove to be a rewarding experience.

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Michael Wilson is one of New Zealand's most experienced business journalists, presenting ASB Business on TV3 and TVNZ for the past 13 years. He has first hand business experience in sharebroking, advertising and also worked for the Department of Trade and Industry, including stints with the NBR and Radio New Zealand.

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Comments [11]

Carlos

17 Sep 2011 01:47p.m.

Where and when ? Can't wait ! $$$$$$$$$$$$$$$$$$$$$$$$$$$$ !

Cliff Mason

16 Sep 2011 08:51a.m.

The problem with the SOE sales proposal is that it would not represent an inflow of capital into the enterprises but merely the creation of a financial asset. There will be no new funds for building generation capacity. Investor's money will be diverted from possible employment in productive enterprises into this asset that will benefit only the traders. The creation of financial rather than real assets has been a major factor in the GFC. The SOE sales would be a criminal waste of our limited capital base.

Jack

12 Sep 2011 09:12p.m.

New Zealanders are incredibly stupid to allow their government to sell off their public assets. Sell-offs, public-private partnerships, etc., have mostly been a disaster in gouging of the public purse and a waste of natural resources. I used to think New Zealanders were smarter, but really, they're lost in their own "American Dream".

Jan

09 Sep 2011 09:34a.m.

We were given shares in Trust Power 20 years ago and after a year were told they would be worth nothing unless we sold $1 a share... if my memory serves me right...Good luck buyers there are bigger people out there than you.

07 Sep 2011 08:09p.m.

You state that "partial privatisation should prove to be a winner for investors. " It follows therefore that partial privatisation should prove to be a loser for sellers. The best way to keep these assets in New Zealand hands is quite obviously to retain them in public ownership and keep the dividends which will, in the long term, return more money to New Zealand than a quick fire sale. Encourage investors to put their money into productive innovative businesses instead of pillaging public assets. Another important factor is the differing aims of private investors and the general public with regard to the use and conservation of energy and the effect on the environment. I cannot think of anything more unwise than losing public control of energy (and water), even "partially".

Fellowes

06 Sep 2011 08:58p.m.

Wolfman... The media is so right-wing the public do not get the opportunity to see both sides of the story. So much for democracy! If a National-ACT govt is elected and asset sales go ahead, the rich will become richer but the country itself will be the poorer for it. I want to know who the Govt is borrowing from - overtly or covertly - they will be calling the shots on all this privatisation. My guess is that it is the Fed.

Miss Molly

06 Sep 2011 11:21a.m.

Oh gosh. Come on we all know once assets are privatised means more costs to average kiwis and worse outcomes vs price control better outcomes and profits going back into NZ. But then again what do you expect would from someone who was the head trader of euro derivatives and bonds for Merryl lynch (these mean are the reason why we had a recession in the first place). I think we all know who's going to buy shares and defiantly wont be mums and dads. Everyone make sure you enrol and vote this election.

Wolfman

05 Sep 2011 04:52p.m.

@Fellowes. They had a referendum, it was called an election, and they stated before then they would be doing just this. The next referendum takes place in November, it's also called an election. We will see the way people hink after this.

braam

05 Sep 2011 02:57p.m.

No one needs a referendum when the majority of Kiwis vote National. Privatising state assets will change bureaucracy and lazy employees wasting tax money. Viva National

Aron

05 Sep 2011 01:17p.m.

No Asset sales are great the country will be rich for the next five years but after that who knows? we wont even have the original income from the assets oh well we will worry about that in five years. Sell it all yea ha !