View from City Road: A clear line for BT shares

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The Government has started selling BT3 - the third tranche of its shareholding in British Telecommunications - with all the drum- banging it can muster. It has announced that instead of eight share shops there will be 100.

But these shares should not be hard to sell. Most years private investors sell more shares than they buy, but this year they are piling into the stock market, pushed in by lower returns from their building society accounts. Private client brokers report a roaring trade, with purchases tending to outweigh disposals. Brokers can now look forward to a boost from the BT3 publicity.

Institutional shareholders are admittedly in a slightly different position, having already provided pounds 2.5bn to companies through rights issues this year. And that is before putting anything aside for the Government's gilts programme, which is only just getting under way.

But the Government could be lucky with its timing. BT's shares have outperformed the rest of the stock market by 10 per cent in the past year as investors have started to see the benefits of the company's enormous cost-cutting programme, which is underwriting dividend growth. BT should also be an early beneficiary of recovery, with call volumes sensitive to economic activity.