THE WEEK REVIEWED.

Auckland Star, Volume LXI, Issue 103, 3 May 1930, Page 4

THE WEEK REVIEWED.

NORMAL BUS.INESS DONE. COMMERCIALS DOWN AGAIN. AUSTRALIAN STOCKS WEAK. For the short week following the Laster vacation business on the local Stock Exchange has been quite good wlisn one takes into consideration the unsettled nature of the markets. Very few sales were recorded on the opening day, and buyers were ihecibant with declarations, but Tuesday found a much better tone and from then until -last night sales were up to normal dimensions. As usual banking shares attracted most attention, and for these there was a definite weakness at opening, but reassuring reports from Sydney had a steadying effect and values gradually settled down on a basis showing, for the most part, little variation from the last quotations before Easter. Australasias, Nationals o£ New Zealand and Union are virtually unchanged, with Australians of Commerce up to 3d. New South Wales, which eased just before Easter, recovered 5/, with a sale at £38 15/, whilst Nationals of Australia, which it is announced will still maintain the former dividend rate, have advanced 1/6 for the £10 paid shares, and 4/ for the £5 paid. English and Scottish, on the other hand, have dropped from 8/ to 9/. However, a dividend payment at the usual rate of 5 per cent has been made in the interim. Late in the week New Zealands also slipped, with sales down to £2 18/. A sharp reduction has taken place in the Adelaide's shares, which are down 15/ dn a fortnight as a consequence of the final dividend rate 'having been reduced from 5 per cent to four per cent. The reason given by the directors is that in view of the present financial outlook in Australia, they considered it prudent to conserve and strengthen the bank's reserves, rather than to distribute a dividend at the usual rate. Without challenging the wisdom of the directors' decision, it may be emphasised that the net profits earned for the year ended March 31 were sufficient to pay the old 10 per cent per annum and still leave £13,000 for reserves. Net earnings for the year were £138,107 against £145,441, and it is probable that most of the £7334 reduction occurred in the second half. The most striking feature of the week, however, is the further weakness in Commercials, which changed hands at £1 1/3 on Wednesday, and for which the best buying price yesterday was £1 0/6. This bank usually pays dividends on its 10/ shares at the rate of 15 per cent per annum. In February, when the present slump was well under way in Australia, the directors, who might be presumed to have a sound grip of conditions and immediate prospects, sanctioned payment of an interim dividend at the usual rate. Since then the affairs of the Commonwealth have not improved, and it is evident that the market considers the 15 per cent rate will be reduced at the end of the present financial year, namely, June 30. Last year net profits totalled £391,624, and the amount necessary for dividends was £308,132. On present valuations based on a 15 per eent dividend, the Commercial scrip shows a return on outlay of about 7% per eent, which, £0 say the least, seems an attractive proposition. Insurances Steady. The insurance section was steady during the first few days, with a minor increase in the case of Nationals following an announcement of the usual interim dividend, and a 3d drop in New Zealands. Sellers of Queensland, which have been neglected in recent months, have raised their reserves from £2 1/ to £2 10/. The end of the week found an easing in South British, which sold 1/ cheaper at £2 10/6. Coals. Chief feature of the coal section has been the annual report from the Taupiri notifying a successful year, and the usual 10 per cent dividend. The only sales have been of Renown Collieries' new issue, two parcels changing hands at 2/9. Shipping. Local shipping shares have had some attention in the week. Holders of Devonport Etoam Ferries have dropped their reserves and sales were onade, first at £1 1/9, and afterwards at £1 1/6, compared with £1 4/ a year ago. For Northern Steam, on the other hand, buyers have raised their offers Gd to 14/. One more of the company's services, the Onehunga-New Plymouth passenger, has had to be abandoned, but it has probably been unprofitable in recent years, and its discontinuance may possibly not affect the company's pvofit and loss account prejudicially. Breweries. A feature of the breweries section has been special interest in Tooth's, the big Australian enterprise. Quite a number of sales have been effected in Christchurch, and the scrip was also quoted in this centre, with buyers at £1 10/9 for the £1 shares. Tooths issued £1,250,000 new shares in connection with dte purchase of Reach's business, and at the same time divided £485,622 in gift scrip, bringing the paid capital to the tidy sum of £5,029,598. For the last two years dividend has been at the rate of 12% per cent, and to obtain this on the present capital requires £702,575. The Dominion concern, New Zealand Breweries, has been a little easier, with sales down to £2 12/. Australians Weak. Australian stocks have certainly not improved during the week. Australian Glass is 6d easier, Burns, Philp 1/, Iron and Steel 6d, and Electro Zincs from 1/3 to 1/6. Mount Lyelle show the biggest drop with a sale lit £1 8/3, against £1 12/ just before Easter. Waihis Busy. Waihis, on the other hand, have had an excellent run with a regular inquiry, and sales almost every day at 13/9 to 13/10. The announcement of the latest dividend of 1/ -per share has evidently had a heartening effect upon investors, and will be the more welcome inasmuch as the chairman of directors, at the last annual meeting, cast a doubt upon the abilty of tlie company to continue tliafc rate of return. ' n The Outlook. The present outlook from an investment point of view is exceedingly obscure. As frequently emphasised in these columns, New Zealand is so intimately associated with Australian finance that conditions across the Tasman are of vital -concern to us. Jobson's Digest of April 15 epitomised Commonwealth conditions as follows:— "Unemployment is a record since Federation, exchange rates are a record, and pessimism is so deep as to render the Commonwealth a vast whispering gallery. Messrs. J. B. Were and Sons, the wellknown Victorian brokers, _ writing two clays later, expressed the view that stock values would go lower, and that the next ' two or three months will find money ' tighter than ever and the market at its lowest. Banks' Special Position. While giving publicity to these unpalatable views 011 the general situatiou, it may be as well to point out that the banking section is differently situated from most others. On figures that have so far become available there is no reason to suppose that banking profits in Australia are likely to be affected to the extent that some investors seem to fear. It is true that Banks, like every other commercial institution, are dependent for success upon the general economic well being of the community 111 which they operate, but the commodities they deal in, hard cash and credit, are indispensable. People must have one or the other, and the banks are able to command their modicum of profit in whatever form the accommodation is utilised. In times like the present tlvey are bound to make some losses, despite the innate conservatism of bank managers, but there

are usually many solid buffers, such a 6 the familiar "joint and severals" between the bank and a bad debt. In other words, the bank is usually the last to feel the pinch when a security thought to be good diminishes or fades away. Moreover, in regard to such losses as may occur, it is consoling to shareholders to remember that the managements have had a long period of uninterrupted prosperity in. which to prepare cover for such a tight time as the present, and it is generally •recognised that the opportunity has been fully utilised. Cheap Money Will Help. The effect of cheap money in London and other financial centres of the Old World is bound to have its reflex sooner or later in the Commonwealth. New Zealand has had 110 difficulty in obtaining its annual quota, and it would appear that there are at the moment ample funds available for investment. The coin holding of the Bank of England continues steady at above £165,000,000. Cheap money at Home, too, is expected to increase the purchasing power of the masses, and this is all of assistance to the producers of Australia and New Zealand.