THE MONEY MARKET

Ashburton Guardian, Volume XLV, Issue 10385, 2 May 1925, Page 6

THE MONEY MARKET

BACK TO GOLD AT LAST. THE EFFECT IN MEW ZEALAND. WEEK ON THE EXCHANGE. (By "Investor.") (Written for the "Guardian.") Last Tuesday will go down in the world's history as one of the most important dates in the record of the money market, since on that day Britain resumed the export of gold. The immediate result should bo the stabilising of sterling on the world s exchange markets at gold parity, winch means that exchange fluctuates only within the limits of the cost ot shipping gold. New Zealand seems to have been "caught unprepared by the decision, and Ministers and bankers, while hailing the British decision as advantageous to this country, have nothing to say concerning the date on which the banks operating in New Zealand will have to adjust themselves to the new order of things. In the meantime, presumably, exchange rates between London and New Zealand will be based on tbe fiction that the gold standard is still in abeyance. A frank statement by the banks as to their intentions would be welcomed by the commercial community. No Gold for Domestic Uso. In the meantime the only clear benefit New Zealand seems to bo likely to receive through the change is that importers of American manufacturer: will have to pay a little less for their imports —a rather doubtful blessing some people will think in view of the over-heavy expenditure of this country on American automobiles, tyres, motor spirit, and other semi-luxuries. It seems certain that the banks, in the meantime at any rate, have no intention of redeeming their notes in gold on demand. The position is that the currency requirements of the world have grown in war and post-war times to a much greater extent than the supply of gold available for currency purposes. In pre-war times New Zealand banks used to carry gold and bullion to the extent approximately of 20 per cent, of their total liabilities. Coin and bullion reserves are a good four millions short of' that ratio today, and it seems that in future gold will be used only for settlements of balances between banks and between nations. Its function as an automatic regulator of tbe currency supply will not be impaired so long as there is sufficient gold available for the settlement of those balances; but it may be anticipated that the divorce of gold from the domestic currency and the perpetuation of an inconvertible paper currency, no matter what prudent safeguards are applied by banks or by Governments, will result in a strengthening of the movement for currency reform and for the placing of supreme banking authority in the hands of a State-controlled central bank. A Government Local Loan.

The psychological effect of the return to gold upon the local share market baa been good, the optimistic pronouncements by New Zealand bankers and bv British financial authorities having been productive of confidence in the future. As a result quotations all round show firmness, and advances have been recorded in several cases. This is despite a somewhat adverse influence in the shape of an apparently well-founded rumour—it comes from an ordinari'v well-informed quarter in Wel!i«H;on—that the Government intends at an early date to go upon the local market for a loan of six or seven millions, offorinsr 6 per cent. It will ho remembered by those who take an interest in such things that the Commonwealth Government's last loan, raised in Australia, was at 6 per cent., and that it was issued at 99. The effect of a big local loan, especially at r,o higb a rate of interest, would undoubtedly have a depressing effect on «hare market values, by considerably depleting the fund available for investment. Government Stock Higher. Government Stock of the tax-free issues has appreciated in value this week, both bonds and, inscribed stock selling at as high as £97 ss, a gam "f 5s on the week. These stocks touched their lowest ebb last month, when the bonds changed hands at £96 7s 6d and the inscribed stock at £96 os. Five per cent, bonds, whie.i started the year at £97 and rose to £9B in February, since which there have been sales at 2s 6d to 5s lower, changed hands this week at £9B ss, the inscribed stock selling at £9B, an advance of 10s on the last previous reported sale. Five and a-half per cent, inscribed stock has been a little weaker, with sales at from £IOO 10s fn £IOO 17s 6d, as against a range ef £IOO 15s to £lOl the previous week. Better Prices for Bank Shares. In the banking group there has been a transaction in Australasia at the unchanged price of £l3 16s 6d. Shareholders are getting rather tired of waiting for the long-deferred new share issue & Both National of Australasia and Australian Bank of Commerce have been rising on the Australian share markets recently owing to a belief +hat an amalgamation is being arranged. National of Australasia {£s paid) sold in New Zealand this week at £7 19s, comparing with sales at £7 12s Gd earlier in the year. Ihere have been no transactions in "A.8.C.," not many -."hares of which bank are held in this country. A Rumoured Mew Share Sscuc.

Following an abrupt rise in London, to which I drew attention last week. Nrtional of New Zealand have been in keen demand tins week, trading commencing at £7 3s 4d and £7 3s 6cl, an advance of 7s 6d on the week. I no price weakened later, and sales haybeen made since at down to £/. H is fairly well understood that tins bank intends making a new capital issue For some time past its manager; ir, varionr; parts of New Zea Jana hav:been unable to accept all tl>e_ new accounts that wore offering simply through hick of capital resources to carry the expanding business, and in such circumstances the acquisition <>f new capital is imperative. The ten; of issue will be awaited with considerable interest. Other Share Market Business. New South Wales have had a little attention this week, and there was a sale at £4l 2s 6d, showing a drop of

5s on the last recorded transaction. The fluctuation has no significance. New Zealands have put on another threepence, latest sales this week being at 54s 3d. Union maintain their value with a late sale of £l4 3s. A sale of Bank of Victoria at £7 shows an advance of 6d on the last recorded sale, six weeks ago. In the insurance group New Zealand is unchanged with sales at 31s 9d. South British have advanced another 3d to 475.

In the loan and agency group there is a quieter tone. A sale of Dalgety's cum div, at £ls 10s shows a drop of ss, and Goldabrough Mort are another 3d down with sales at 47s 9d.

In shipping shares the business has been centred in Huddart Parkers, with the exception of some Auckland traffic in Northern Steam. Huddarts have sold at up to 43s 9d, showing an advance of 6d.

Among meat shares Refrig. show a weaker tendency, the contributing shares selling at 10s 3d and 10s 2d, a drop of 2d. Gear Meat have had business at 445, against • 41s 6d, the last sale reported. A sale of Christchurch Gas at £7 15s shows no change. Wilson's Cement have risen another 3d to sales at 32s 9d. Beath and Co. are unchanged with a late &'ale at 33s 6d. Burns, Philp are another 6d up with a sale at 375. A sale of Whitcombe and Tombs at 70s 6d is the first published since November, when 71s was paid. In the mining group there has" been a good deal of buying of Mount Lyell, but no great change in price, which has ranged from 21s to 21s 6d. Waihi, under the influence of a good annual report, referred to last week, have had sales at up to 26s 7d, an advance of Is Id.