THE WEEK REVIEWED.

Auckland Star, Volume LXV, Issue 153, 30 June 1934, Page 4

THE WEEK REVIEWED.

BUSINESS STILL DULL IRREGULARITIES OF MARKET LOW RETURN ON INVESTMENT. lIUXICIPAL CREDIT STRONG.

A wise old investor once said that it a capitalist bought a poor security he had to take a cut in his principal, and if ho bought a good security he had to take a cut in his income. .At the present time there seems to be a general willingness to sacrifice income for security, and no it is that the return for many high-grade investments at the values now ruling i.s ! well below the level of 4 per cent, and only for very few is it as high as 4Vi per cent. A glance at the double-column investment j table published on thi-s page each Wed- ! nceday should suffice to .show that the return, in all cases where the security is good, is to-day unusually low. The reason for the rise in the value of shares and debentures of the best class is that they are governed by the trend of interest rates, and such rates have been falling steadily over the past 18 months until the leading local authorities can now borrow at 3% per cent. Only a few days ago the Wellington City Council borrowed i."24,000 at this rate, and the indications were that it could have had much more. It, was a convincing demonstration of the standard of municipal credit in this Dominion, and naturally has had a firming influence upon the market for local body debentures generally. Conversion Activities. Recent trausfers of local body scrip in Auckland have fixed the yield on investment between X 3 13/ and £3 10/0, and at this level the supply is only moderate, it seems to be confined mainly to Harbour Board and City Council debentures. There k a. dearth of debentures from outside local districts, due probably to the conversion activities which are now under way in many directions. An interesting feature in connection with the conversion of debentures to a general level of 4'/i per cent i.s the treatment of all scrip now rated above 5% per cent. To bring this scrip down to -IVi per cent it is necessary to make a cut of more than '20 per cent in the interest, and, to adjust matters fairly, the holders receive a prc-payinent on conversion. For instance, the holder of a G per cent debenture maturing in 11)50 is entitled to receive immediately 11/ per £100 for the 10 years the loan has to run. This is daeecd as a conversion premium, but it is actually a pro-payment of interest. Another point which has arisen out of the conversion operations is in connection ; with the levy of income tax on the amount of the so-called premium. Deben-ture-holders are required to make a return of the amount of the pie-paid interest iu their income tax tonus, and they are taxed on it at the ordinary rate. It is understood that the Australian income tax department did not make such a levy in similar circumstances. Bank of New Zealands Better. Turning to the general features of the investment market during the past, week, it appears that there has been a continuance of the conditions prevailing iu the previous week. in some cases the weakness which had developed earlier became more pronounced; in other cases there were signs of returning strength. Some insurances were dclUlitcly weaker, and there was still a dull tone in the bunking section. Bank of New Zealauds, however, have become tinner again, and have been active at i' 2 S/b\ which is an improvement of (id since a week ago. Commercials have been traded at the low figure of 16/1. E.S. and A. have made some recovery, and Unions have hern steady around £9 10/6. The D Mortgage shares of the Bunk of New Zealand came into favour again in the latter part of the week and made a rise of 5d in two days. Trend of Market. The trend of the market since December of 1033 is shown iu the following table: — BANKS. Dec. Mar. June June 31, ;sit. --•, 1933. 1031. 1 !>;'>•». U>34. Australasia ... S4S/0 SG2/0' 340/ '2.".."i/ Commercial ... 17/7 lli/11 Ki/ - J ld/1 K.S. and A. .. 1112/0 114/ C Itil/C 1(11/ Xnt. (N.Z.) .. 81/ SL'/ti 77/0 1."./ N'at.. A'sia. con. 130/ V2'.)/ \Slf VM/ S. S. Wales .. 047/0 U7.V (ilO/ 01.1/ New Zealand . 4S/ 4S/3 48/ 48/0 Union 101/ I!!.).'!/ IU7/ IOU/ti MISCELLANEOUS. Dec. Mar. June June 21, 30, -J», 1033; 1034. 11)31. l'j;!4. N.Z. Insurance r>7/ 58/8 00/ 00/9 South British . 77/ 7(i/(i 7!)/:! 70/8 Goldsbrough, M. ."Jt/o ;i:t/:i Bi/a 30/u Colonial Sugar 127(1/ 12!»0/ 1303/ 1320/ Auckland Gas . 24/ 24/0 liO/G 2U/(i Easing of Government Stocks. Like the banking and insurance issues, Government stocks have been slow, even dull. The demand has been there, but at reduced figures in the ea.se of the .'i% per cent tax-free iesuen. The email turnover of business has not given a very good indication of values, but it can be said that the 4 per cent stocks have eased at least 5/ this week and the 3% per ccnl« 10/. Jt may be contended that, this it* a reflection of the uncertainty which occurs at the reassembling of Parliament, but that influence has been less noticeable in the past week or fortnight than at any similar period in the past few years. There is less anxiety to-day about what Parliament is likely to do. The easing in Government stocks can be explained quite feasibly a* a reaction from values which investors decided were too high. Interest Rates. The following table shows the return on Government stock to the present purchaser, based on redemption at maturity:— Sale Accrued Keturn price. interest, p.c. p.a. Stock. £ s. d. £ s. d. £ s. d. 4 (l!) 40) 103 10 ft 1 1C 2 3 B 8 3J (1038-43) . l(Ki 10 0 1 0 3 *3 1 0 *Free of income tax up to 103S, aTter which the stock has another five years to run with interest ior the additional term at 4 per cent. . Movements of Pastoral Scrip. In the pastoral eection there has not been much activity. Goldsbrough Morts have been firm around £1. 10,' U. ex dividend, and sides have been, made in the South above that figure. Farmers' Cooperative preference shares, for which the inquiry 'has been continuous for some time, have, had transaction.-? at values which point slightly downward. Kauri Timbers Fluctuate. Shipping scrip line been neglected. Among coal shares, Taupiris have been definitely firmer, with an unsatisfied at 13/0, and Westport-Stockton ordinary shares have moved up fairly sharply. Kauri Timbers dropped back after a sudden rise last Saturday, but they have moved up again with sales at 16/9, and more wanted at the same price. For Taupo Totara shares also there has been a better inquiry, and buyers and sellers were only a shilling apart at the end of the period under review. Kaiapois have monopolised attention anions woollens, and have made two rises in the week, reaching 11/3. Brewery shares have been quiet in Auckland, although there has been some activity in the South, but New Zealand Breweries have had two s.ilew recorded which showed a drop of nearly 2/ in a fortnight. Industrials Quieter. Industrials have been quieter this week than last, and Byeroft shares have not been oJiV:-ed in .such numbers, but business has been clone which showe that

values are firm. Colonial Sugars have made a slight advance, with offers raised to £05 15/. Farmers' Fertiliser shares have continued the advance of last week with sales up to £1 1/ and buyers following the movement. New Zealand Kefrigeratini; (eon.), on the other hand, have been slightly easier at !)/. For New Zealand Paper '.Mills offers arc firm at £1 10/, but the supply appears to be very light. Wilsons Cements have been unusually quiet, clctsing yesterday with n range of 10il between buyers and sellers. Ups and Downs in Mining. ' Mining shares have shown some improvement on last week, but the movement has been somewhat irregular. An outstanding feature \v»is the weakness which developed suddenly in King Solomons two days ago following a decrease in the returns, and latest sales were down to 3/3. Jiig Rivers moved up almost ;us ehurply under the stimulus of an optimistic report from the mine. Perhaps the most notable recovery, however, has been in Talisman Dubbos, which in ten days have gained 2/3 in value, and arc meeting with a strong demand. Waihis have had only one sale in the week, but Grand Junctions have sold fairly well, showing a slight rise. Demand For Debentures. More attention than usual has been given to miscellaneous debentures, and the sales list includes Booth Maedonalda, showing a substantial rise since the las: transaction eight months ago; Hikurungi Coal 7 per cent debentures, which are steady; Amalgamated Brick (Auckland), which have moved up 10/ to £9o; and Auckland lias OVj per cents, which mature next year, at £4 above par. Latest Sales. Sales completed since the last review have been: — Banks.—New Zealand, £2 8/6 (3), £2 8/4. £2 8.0: Now Zealand. \) Mortgage, £1 13/0 (2), £1 13/10 (2), £1 14/ (2J, £1 14/2; National of New Zealand, £3 Jo/; Commercial, 16/1 (4); Union, £9 10/6 (3). Insurances. —New Zealand, £3 (7), £'■'> 0/3, £3, £2 W,!); South British, £3 19/0, £o 10/3 (3). Government, Etc. —Bonds, 4 per cent: lUsii, £10?. Stucu, 1 pur cent: Jt>lo, £HHi 10/; 11).>J, £107. Central Power Boaid, JVi (IUOIJ, .eiOii; City of Auckland, 5Vs UU37J, £104 10/. Mining.—Gillcspie's Beach, 1/10; Golden Dawn, a/4; Maliukipuwu, lUMjd, lOd (2j; Mutaki, 2/3 (-); King Solomon, o/J; u ami, £i 12/Lt; Wiuiu Grand Junction, i,-, 4/3 t.2j; Jinan Jioru, l/7'/a; Skippers, UMsd, !Al 14}; Xuiumun, 14/. Australian. —British Tobacco, £1 10/0; Electrolytic Zinc (.ord.j, £t 4/0; colonial (Sugar, £UO. Dominion. — Westport, 18/; Westport StocKOon, 3/1; Auckland Ctas, £1 0/7 (I), £1 0/0 1.2); ditto, Oil; (11)35), £104; ditto leuuj, i'J/0 (A); ivaiiri linioer, li/, 10//, 10, D; Kuiapol, 11/, 11/3; New Zealauu Breweries, £2 2/, £2 2/3; Byeroft, £2 8/ (2); Consolidated Briuk, 7/3 i 2); Fanners' trading, .i/j (.2), 5/3; ditto (B pref.), 13/0 (2); I'armcrw Co-operative, A pref., £1 1,3; ditto, B pref., £11/ (2); National Electric, oj't\-A\ \n\v Zealand jNewspapeits, £1 D/ 0 (2); A'ew Zealand Refrigerating (con.), 9/3, 0/2, 0/; Wilsons Cement, £1 9/ (2); Woolworths I.Sydney, 10 per cunt pref.), £1 19/3; Booth Macdonald, OV2 (V.r.il), £72 10/; Hikurungi Coal, 7 (10J8), £50; Amalgamated Brick, 7Ms (Auckland), £U3. Unlisted,—.lnvestment Executive Trust, second B debenture,,, £1)4 10, ; Auckland r'armers' Freezing, XI; Loyal (pref.), £1; National Tobacco, £3 4,0 (2); Now Zealand Perpetual Forests, £2 8/; Woolworths (Victoria, pref.), £1 0,3; Uolcondu lluKliiigH, 1/7; Woolworths (Sydney, ord.), £j 10 ; ; Ilarvcj Oil, £1. BUSINESS IN THE SOUTH. (By Tolejfrapli.--Special to "Star.") CHKISTCHURCH, this day. The volume of business has been well maintained during the week. The price movements have been small. Banks generally arc firm, and offers for coals, woollens, breweries and some miscellaneous issues have hardened. Local dealings have covered n fair range. The totals com pure as follows:—This week, 40,407; lust week, 04,900. An analysis of the business is as follows, with last week's totals in parentheses:—Banks, 1024 (1759); insurance, 7."0 (200); loan and agency. 1650 (500); meat. 1000 (1000); woollen, 500 (100); coal, 800 (000); gas, 173; Breweries, 1250 (950); miscellaneous, 1000 (3450); mining, 40,050 (55,750).