A nation of small shareholders, many of them first-time investors, is defying Asia's financial gloom

By TOM DUSEVIC

year ago Louisa Moran would toss away the business section of her morning newspaper. Now the 27-year-old sales manager for a Sydney furniture store devours the financial pages, tracks share prices daily and constantly talks to her friends about making money. Last November Moran bought into the partial float of telecommunications giant Telstra--and caught the share-market bug. "I've just moved back to my parents' home so I don't have to pay rent and to save money to buy more shares," she says.

In the past year, amid the Asian financial crisis, more than a million Australians have bought shares for the first time, half of them coming into the market when the government sold one-third of Telstra. Share ownership has soared to 5.5 million people, 40.4% of the adult population. Only the U.S., where the share ownership rate is 45%, has a higher incidence of private investors. Yet some observers worry about "people's capitalism," as it has been dubbed by the conservative government and its acolytes in the financial press. A big share-market fall, they say, could add another aggrieved group to those who missed out on a stake in recent government asset sales or who fear that more such sales will threaten public services.

According to Australian Stock Exchange managing director Richard Humphry, the level of interest in last week's float of in surance giant AMP and in this week's privatization of the N.S.W. Totalisator Agency Board suggests Australians may soon rival Americans as the world's keenest share buyers. "This trend is a very positive thing because it spreads investment throughout the country and stabilizes the market," says Humphry. "Private investors are an extraordinarily stable investment group. They don't rush into the market and they mostly buy shares as a long-term investment."

That's certainly Louisa Moran's plan. She says she'll keep her 1,200 Telstra shares for five years. Moran takes her next share- market plunge this week on the $A1.1 billion TAB privatization. The sale of the state government's gaming monopoly has attracted some 750,000 applications, with demand swamping the supply of shares by 3 to 1 despite falling Asian share prices. "I'll take as many TAB shares as I can get," says Moran.

The local exchange has been helped by the stunning debut of AMP, which hit the market at twice the base price of $A16 last Monday. After the first day of trading, the company had delivered an average gain of $A16,400 to its 1.5 million shareholders in Australia, New Zealand and elsewhere. Initial ASX estimates suggest the AMP float has created 500,000 first-time shareholders in Australia, bringing the national total to 6 million. Despite some concerns about the conduct of the first days of trading--there were reports that one of the brokers involved in the float had "come in like a gorilla"--the AMP venture has been the most successful float in Australian history.

The Sydney Stock Exchange opened for business in 1871, and for its first century served mainly as a source of funds for resource companies. Speculative booms and busts were not uncommon. For most Australians, the stock market represented the "Big End of Town," says Humphry; they saw buying shares as a risky game for the rich or those with financial savvy. In the past 25 years, he adds, the market has been filled out with more industrial and financial companies. Yet only a decade ago, after the October 1987 crash, a mere 17% of the population were exposed to the stock market--either directly or through managed funds or private superannuation.

The recent surge in private share ownership reflects a more financially sophisticated public, the growth of managed funds, the transformation of life insurance offices to public companies, and--following the policies of Margaret Thatcher in Britain--government moves to privatize major public assets such as the Commonwealth Bank and Qantas. According to Shares magazine managing editor Ross Greenwood, several things came together after the early '90s recession to spur share ownership. "There were lots of dire predictions about property prices at that time," recalls Greenwood. "And we were hearing all these messages about investing in a low-inflation environment. So people started looking for other investments." When shares in the Commonwealth Bank were being sold, he says, people figured it was better to get a return of 6-7% on a stake in the company rather than keep their money parked in deposit accounts at a time of falling interest rates.

On a cold, wet Sydney winter morning a few days after the AMP float, the traditionalists of share ownership took up their positions in the pit at the entrance to ASX headquarters in Bond Street, in the heart of Sydney's business district. Here, retired men with clipboards and dressed in grays and drab browns are joined by younger men in dark business suits between appointments to monitor share price movements. But according to an ASX survey taken in March, people like Louisa Moran and those born at the end of the post-World War II baby boom are the emerging face of Australian share ownership. Female participation rates have jumped from 28.3% in May 1997 to 36.2%. More than one-third of those aged 25 to 34 have some form of share ownership. And more than half of those in the prime mortgage-belt, baby-boomer age group are shareholders. As well, a fair proportion of low-to- middle-income households have taken up small shareholdings.

The federal government is thrilled by the Telstra float's success: 2 million people bought shares, and the price of the first $A1.95 installment receipt has almost doubled in seven months. The privatization has made investment in shares a mainstream activity.While this new group may not be as knowledgeable about investment as those watching the board in Bond Street, it does crave information. Since its launch in November 1996, Shares has lifted circulation to 75,000 a month by simply trying to "popularize the notion of investing in the share market," says Greenwood. He points to the crush of people at ASX open days and seminars: "People are curious and they're becoming educated about investment."

Could the reason for the boom in share ownership be the fabled Australian vice of gambling? That is true only in part, says Greenwood, though "the notion of greed motivates any investor." The ASX's Humphry rejects the charge as a misconception. "People do lose money but I dismiss out of hand that the exchange is a two-up school," he says. "We do not see highly speculative trading by private investors here."

What could spoil the nation's appetite for shares, however, is the most obvious culprit: a fall in prices. Says Ted Rofe, the chairman of the Australian Shareholders' Association: "A lot of people have come in during a rising market and they may have dashed expectations if there is a significant downturn."

Not everyone is choosing to expose himself to the vagaries of the share market. In the AMP's case, some small policyholders did not want to demutualize. Nor is privatization distributing the benefits widely. According to economist John Quiggin of James Cook University in Townsville, Qld., privatization is a dramatic transfer of wealth to the middle class and the finance industry, which takes the biggest share of the spoils. "People's capitalism is still highly unequal," he says.

Quiggin believes privatization is being presented to voters as "an offer you can't refuse." He likens investing in public floats to purchasing a government bond where government itself determines the return through regulation. "People are buying a political bond on the future goodwill of governments. Can the government afford to alienate those voters? No. How much money will Telstra make? As much as the government lets it. The only risk share buyers take is that a government which is overtly hostile to all this will take it away from them in the future."

That prospect can't be ruled out. The Country Women's Association and the National Farmers Federation have vowed to campaign against the sale of Australia Post and are worried about the loss of communications services in the bush. Pauline Hanson's One Nation Party has also tapped voter discontent surrounding the sale of the rest of Telstra. As well as opposing plans to introduce a goods and services tax, Hanson's populist platform rules out the sale of assets, especially if they end up in the hands of foreigners. Yet as the Australian Financial Review noted in an editorial last week, Queensland, the state that launched Australia's latest political phenomenon, is also the place where share ownership is most popular. As Humphry argues, the development of a diverse and populous group of local shareholders is just the thing that could help to protect Australia from the ravages of globalisation and market speculation by foreigners that so frightens Hansonites.

Louisa Moran remains optimistic. Although she has yet to experience the downside of owning shares, she's excited by the prospect of the next few years--and betting that Australians will keep backing the horses and making telephone calls.