THE NEW ZEALAND LOAN

New Zealand Herald, Volume LXII, Issue 19050, 22 June 1925, Page 11

THE NEW ZEALAND LOAN

SMALL PUBLIC RESPONSE. WIDESPREAD DISCUSSION. . ADVERSE CIRCUMSTANCES. DOMINION'S HIGH CREDIT. [from our own* correspondent.] LONDON, May-22. Tliere lias been much discussion in the British press regarding the public reception of the New Zealand loan of £7,000,000. One who thoroughly tinderstands New Zealand finance as well as being in touch with the city, says that the impression in financial circles was that the conditions were not favourable and that the time was inopportune for offering such a large loan, especially as there was the knowledge that the London County Council loan would immediately follow. Further, the amount available for investment abroad is considerably- less than it was before the war, and those responsible for financial matters in the Dominion would be well advised not to lose sight of this aspect. Although the loan was underwritten and naturally the money will be forthcoming, tho fact that it fell to 2 per cent, discount immediately should be a warning for any contemplated future operations on the London market. Upon the issue of the prospectus, very complimentary references were made in the leading journals to the prosperity of the Dominion, to the fact that full information was given regarding the national finances and the purposes for which the loan was required. Commenting on the announcement that 85 per cent, of the loan had been left with the underwriters, the Financial Times observed that the London market is suffering severely from tho recent glut of new issues, and dealers are unanimous in expressing the opinion that a period of freedom from fresh loans is desirable in order that underwriters who are carrying large blocks of stock may be given an opportunity of lightening their commitments. . . . The consol market is not altogether pleased with the way in which the issue of so large an amount of stock was brought out somewhat unexpectedly. It arrived at a time when the gold standard talk is having a disturbing eSect upon gilt-edged stocks as a whole, and also upon tho minds of those investors who put their money into such securities. It is evidently felt that greater consideration might have been extended to the immediate factors surrounding the monetary position than appeared to have been paid. A similar view was expressed by the Times, which remarked : —".The moment is not propitious for the raising of large loans of the trustee class—more particularly, of course, loans for oversea borrowers; In spite of the reduction of 6d in the income tax, the Budget has failed to give that impetus which was hoped for, investors having adopted a • wait-and-see policy." Depression of the Issue. A responsible member of a firrn_ in tho city, closely connected with New Zealand finance, said: "There is no doubt that the issue came at a very inopportune moment, just after the gold, standard had been reintroduced. I think that the press —perhaps instigated by those in high quarters —felt that the fact that an overseas Dominion intended borrowing as much as £7,000,000 was going to prejudiceperhaps slightly—our return to the gold standard. Therefore, the people in anthorfty who influenced the press, did not feel wejl disposed toward such a large l°an. . " On the other hand, despite the fact that it had 'been advertised that the underwriters would have to shoulder a large amount, over £1,000,000 of the stock was applied for by the public. This shows that New Zealand stock is very popular with the public, and it is quite clear that the larger investor who is au fait with what is going on would not apply, knowing that he would have an opportunity of purchasing later at a discount. The course of the market has very much borne this out, because the number of buyers since the issue has been very large and the stock has steadily improved. New Zealand has been of recent years one of the most popular countries "for investment —if not the most popular —outside Great Britain, and wo have very little doubt that within a reasonably short time the late issue will become absorbed and will stand as high in the market as did the previous loan quite recently. "It was unlucky that.the return to the gold standard and the many other borrowers made a condition of affairs which prevented any possibility of the success of any big issue on reasonable terms. But we have no doubt that this very temporary rebuff will not redound in any way to New Zealand's discredit, and that in the future, as in the past, the investors of Great Britain will recognise that, outside this country, there is no investment as safe as New Zealand Government Stock." Underwriters' Decision. To obtain an absolutely independent, opinion regarding' the view taken in the Citv, outside New Zealand circles altogether, an experienced financier who has a good knowledge of overseas finance in various parts of the Empire, was interviewed. Asked whether he thought the time for the flotation had been judiciously chosen, he replied— Xdo not think the High Commissioner or his. officers are to be blamed in the matter at all. The miscalculation, such as it was, was that of the underwriters. They evidently thought the loan would go a.t the price fixed, and it. was certainly not for the High Commissioner to press them to stand out for better terms. " The issue had to face a certain amount of sheer bad luck. Several causes went against it. There was the uncertainty of how the return to the gold standard and the consequent tightening of money would affect --things, and this had been increased by the knowledge that had got about that there had been some selling of gold {or abroad by the Bank of England. People did not knowhow far this would go. Then there were the gloomy discussions in the papers, following on the Budget, of the position of some of England's chief industries—such as coal, iron and steel, shipbuilding, cotton and the possibility of industrial trouble among railwayman. Abroad there was the Hindenbnrg election, and the fall of the friendly Herriot Government in France. Finally, it is possible that a certain number of people in the city we.ro expecting the very large London County Council loan which immediately followed. The L.C.C. stock has always been a very favourable investment and "people would naturally wait for that. A Friendly Hint. " I do not think there is any lack of understanding in this country about the resources of New Zealand or its general prosperity. Theso are well known. But the New Zealand Government has been a very large and regular borrower since the war, and £7,000,000 is a large sum of money. If New Zealand does not mind taking a friendly hint, I think she has been coming here rather often, and she might do well to come a little less regularly." "It lias been said by many people that possibly Mr. Massey's death may have shaken somewhat the faith of investors. What is your opinion ? " was asked. , " No, I do not think the death of Mr. Massey had anfthing to do with it. People here know nothing of the internal politics of New J'.ealand, nor are they in the least interested in them. They believe New Zealanders to be a peaceful, industrious, loyal population, and imagine that they will continue to be so under any Government likely to hold office."