FINANCE AND COMMERCE

Press, Volume LXXII, Issue 21973, 23 December 1936, Page 11

FINANCE AND COMMERCE

THE ADDINGTON MARKET FI RSI TONE THROUGHOUT The weekly Addington market was held yesterday instead of to-day because of the holiday. Throughout the sale was firm for all classes of stock. An unusually heavy penning of fat lambs for a pre-Christmas market sold keenly at a shade higher than export rates. Fat sheep also sold better, as did store ■=heep, and fat cattle practically retained recent values.

Stock exchanges throughout New Zealand closed yesterday for the Christmas vacation. The Australian exchanges will close to-morrow. At Christchurch the year closed with markets on the whole firm, with an upward tendency in the case of favoured industrial stocks.

A warning that New Zeal and exports of lamb were reaching very nearly saturation point on the Home market was oiven to an audience of farmers at Dunedin yesterday by Mr James Begg. a member of the Meat Board, who recently visited England. In a statement reviewing the shipping freight contract, the increases under which would cost the Dominion an extra £ CO,OOO a year, Mr Begg said that the shipping people had been absolutely solid and the New Zealand representatives who met them had to do the best they could.

STOCK EXCHANGE Trying Year For Investors PERIOD OF ANXIETY Investors as a class will not mourn the passing of 1936, which has been a period of worries and uncertainties of unprecedented weight notwithstanding that it has been a period of rapidly rising prosperity in the Dominion. Other things being equal, the New Zealand investor, with commodity prices rising under the world-wide spread of better times, should have been able to enjoy a time of increasing values and confident buying, but the domestic atmosphere has been one of unremitting anxiety almost throughout the year.

In November. 1935. a Government which had made no secret of its animosity toward that rather vague bogey, the Stock Exchange gambler, was elected and investors immediately drew in their horns. Some definition of the Government's financial proposals was promised early in the year, but time dragged on with nothing forthcoming except vague generalities and assurances that no one had anything to fear. That investors quite definitely did fear something has been amply demonstrated throughout the year by the decreasing support and heavy writing down of many New Zealand stocks, and the avid buying of Australian shares.

Across the Tasman, the Slock Exchanges have had what almost amounts to a boom, but with one or two minor exceptions, the Australian sky has been cloudless, and industrials particularly have in general met a prosperity that has not been known since 1929. The outlook is good, with the promise of payable prices for primary products exported, and with employment increasing as manufacturing expands to meet a widening demand. The Commonwealth has had to modify a little the policy of stimulating recovery bycheap money, but the rise in interest rates has not checked the momentum of the upward swing.

Higher Export Income The contrast in the Dominion is decisive. Export income has risen to a figure not far below that of 1929, and wholesale and retail sales have been more buoyant than for years. Importers have been busy. But unemployment persistently refuses to decline as it should, and company earnings, in which the investor is primarily interested, have already been affected by the sharp rises in labour costs, in taxation, and in raw materials. Industrial concerns have not yet had time to assess the full value of their added burden, but signs have not been wanting that in many cases they will be heavy. Perhaps the most disturbing feature of the. year has been the avowal of the Government of its intention to regulate industry. To this end the Industrial Efficiency Act was passed, but there are few people in New Zealand, even it may oe assumed, in the Labour party, who are aware of the full significance of this piece of legislation. Its effect on investors has,been to enlarge an already swollen distrust of the future of investment in this country.

On the Stock Exchanges, the mortgage legislation of this and the last Government has had a rather unexpected result. Money (that has usually flowed freely into mortgages on land as a form of investment has been discouraged by continued legislative interference with the contract between borrower and lender, and has sought work elsewhere. Many investors have been forced, much against their natural inclination, to buy stocks which, though fney may be perfectly sound, cannot be called gilt-edged. ThL is hardly specuhtion, but is a loosening of the standards to which many investors have adhered steadily for years. Australian Prosperity So great has been the prosperity of Australia, and so rapid and sustained has been the appreciation of shares of Australian concerns, that naturally, the year has seen a good deal of pure speculation for capital gain. In fact, hiany of the Australian market leaders now return a rate of interest well be|°w that obtainable for Government loans, future increases in earnings havlnß been heavily discounted. This speculation has not mtirely been because of greed, but in large measure has been stimulated by the feeling that ®n gains should be made as quickly as Possible, because of the obscurity of {he future. An instance of this has been the excited buying from time to nine of chain store stocks, and from ‘he same underlying cause, the rise in HL e price of Government loans.

Turnover for the year was rather more than £1,750,000. The period opened quietly, with investors hardly recovered from their surprise at the election result, but by the end of January business was fairly good. Activity continued to increase as many owners of money bought Australian stocks, attracted by the continually rising prices on the other side of the Tasman.

Confidence was fairly well established till the announcement of the reorganisation of the wheat industry disclosed the Government's intention of controlling other industries, and there was a sharp fall in several Dominion industrial stocks, notably Bycrofts and Northern Roller Milling. Investors were also by this time becoming somewhat restive over the continued vague reassurances of Ministers that the financial policy of the Government would be made clear within a short time.

The increase in Australian bank deposit rates in the middle of March caused an immediate fall of prices in Australia, with a similar immediate reaction here, and with the near ap- , proach of the parliamentary session, always a restrained time on the Stock Exchanges, the quarter ended dully. The Reserve Bank On the election of a Government committed to some undefined form of State financing, shares in the Reserve Bank slumped. The Prime Minister repeatedly assured the country that | when the private shareholders were bought out they would not suffer. When the announcement of the price was made it was a cheerful reassurance to the market, and the market at once responded. The announcement later of the price of the Mortgage Corporation share purchase added to the feeling of confidence, and after Easier the Exchanges became busy, with Australian industrials taking the majority of the business. Australian stocks were then enjoying a steadily hardening market, and the Exchanges of New Zealand were not slow to respond. Toward the end of the June quarter there was a suspicion of hesitancy. Industry began to see. albeit extremely vaguely, some of the possible effects of "the increase in wages, and possible increases in other charges, and as the Australian-Japanese dispute had caused an unfavourable reaction on the Commonwealth Exchanges, the quarter closed on a note of caution, though turnover was still fair. The Exchanges became increasingly cautious soon after the opening of the September quarter, a condition that the disappointing Australian loan, and the more serious outlook for the wool trade owing to the dispute with Japan did nothing to relieve, in the following month the budget was presented, and though it relieved the minds of a great section of the public which had feared some spectacular unorthodoxy in Labour financing, it was a bitter pill for taxpayers, among them industrial concerns, to swallow. Thereafter there was little strength in the market. Exchanges Dull The December quarter opened with Exchanges dull, and investors worried by the mass of legislation that had been passed. As Parliament closed, the Bank of New Zealand, of which the shares had reached the lowest levels for many years, announced unchanged interim dividends on all classes of stock, and this put for the time being a great heart into the market. The conversion of the 1937 loan. and the rather discouraging response to the new- offer did nothing to clear away investors* doubts about the future, but chain stores were cqmmanding a great amount of attention, and turnovers were well maintained. Dealings in Government loans, too, helped to swell the total, and in one week at the beginning of October, turnover in Christchurch was more than £BO.OOO, the heaviest for many years. Till early in December business was well maintained, though it was erratic, but in the last fortnight business, as is usual, fell off with the approach of the summer holiday. The outlook for next year remains obscure. Among the new legislation passed this year is enough, if earned into effect to the limit, to make investment a thing of the past. Professoi Murnhy summed it up neatly when he said, “There is no room in the socialist Utopia for an investing class at all, and in proportion as socialism becomes complete and effective in our country that class must be eliminated” Mr Semple has threatened continually the extinction of the Stock Exchange “gambler,” and other Mm* isters have avowed the aim of their party to socialise the country, but it is doubtful if at the end of 1937 investors will be much worse off. except that they may be mulcted in more taxes, and harassed by a multiplicity of new regulations. The economic barometer promises fair weather. The export season for wool and meat has opened with prices on levels that have not been seen since 1929. and even dairy produce is reasonably remunerative. Intel nallj the country is prosperous. CLOSING DAY AT DUNEDIN [THE PRESS Special Service.] DUNEDIN, December 22. The last .cv. calls which preceded the close of the Stock Exchange year, today, did not produce much activity among the various classes of investments although there was a general tendency to firmness in the market for reliable stocks. Bank of New Zealands were enquired for at the last call yesterday afternoon at £- Is. but sellers did not come forward. Commercial Banks met with fractionally firmer enquiry at 19s Id, sellers showing no interest. Union Banks were also in better demand at £lO 4s, sellers asking 2s above that figure. Buyei s Union Steam preference shares were prepared to give £1 5s 6d (ex dividend), but sellers remained firm at £1 6s 6d. Buyers of Goldsbrqugh, Morts offered £1 15s 6d, but this price did not attract sellers. The market for the New Zealand Guarantee Corporations which had eased a Ijifle during the last few days, returned to former level, buyers offering 5s M without resuonse from sellers. uroinary Wright Stephensons also showed improvement. buyers being preparedto give 19s, compared with 18s 9d the previous day. No sellers came forward Buyers of Otago Farmers ottered s cum dividend), but sellers would [not accept less than 4s 6d. Ordmary

A WARNING TO PRODUCERS j THE EXPORT POSITION | SATURATION POINT APPROACHING? MR JAMES BEGG’S OBSERVATIONS i I [THE PRESS Special Service.] j DUNEDIN, December 22. | Addressing the Otago branch of the Farmers’ Union to-day. Mr James Begg, a member of the New Zealand Meat Producers’ Board, reviewed the negotiations in regard to the export trade, which had taken place during his recent visit to the Old Country. Discussing the negotiations in regard to\£reights, Mr Begg said that the representatives of the Dominion had met the shipping companies in London, early in April. At that time the New Zealand Government had decided that it was going to take over New Zealand dairy produce, and, naturally and rightly, it wished to have a direct say in the freight contract. They spent several weeks discussing the terms of the contract, pending the appointment of a Government representative in London. This representative was appointed in May. so that, unfortunately there was a delay, and information was being received from New Zealand regaiding rising coils. It was then found that it was impossible to j get the shipping representatives to- | gethcr in Mav. because they had then j become widely scattered. They had j got together in June. Dr. Campbell , representing the Government. It was • then found that the temper of the | shipping representatives had hardened very considerably. They had got word that wages in New Zealand had \ been restored to the 1931 level, with a 40-hour week, and shipping companies wanted to know what these ad- ! ditional costs would mean tp them. ! Shortly after, the Maritime Board in ; England had decided that the working j hours of seamen should be reduced ; from 84 to 02; and this also meant a : considerable item of cost to shipping , companies. An Additional £OO,OOO Mr Begg went on to say that the , Dominion representatives were therefore in the position of having to make ; the best arrangement they could with , the four shipping companies that could give New Zealand the service. ; The shipping people had been abso- ; lately solid, and they had to do the best thev could. The increase in the freight charges had been 2i per cent. ; on all cold store produce, with the exception of fruit and honey. Ho assumed that the Government had expected that. The increase of 2i per cent, meant a total increase of something like 1 £60,000 a year for the next three i years. Thev might conceivably have got better terms it they had been able to fix up the contract in April. He did not think, however, that the advance of £60,000 per annum meant I more than a fraction of the additional : costs, which shipping companies would i be liable for under present conditions. : The alternative would have been that they would have had no contract at . all. | The Export Position Referring to the export position. Mr Begg said it was stated that there would be an increase of 1,000,000 lambs in the North Island on last year, and he was of opinion, from his own observations and from information he had obtained in England, that, if New Zealand exported another 1,000.000 carcases. the actual monetary return to farmers would not be very large, as prices would be reduced. The farmers would get just about the same money, despite the extra 1.000.000. Taking all factors of the situation into consideration, it seemed to him that they were reaching very nearly saturation point in the Home market, and that they would hja ,r e to realise the position. Referring to pigs in (he Homo market, Mr Begg added that he found that New Zcalan.l had a particularly good reputation. In Smithfield it was said that New Zealand porkers were the best on the market. Baconers. however, were not in quite the same position, but they had a ready sale. FLOUR, WHEAT, AND OATS CENSUS OF STOCKS POSITION ON NOVEMBER MI (rrnss ASsocunoH telegram,) WELLINGTON, December 22, A Gazette issued to-night states that a census of stocks of •flour, wheat, and oats in the Dominion was taken as at November 30. 1936. when the following quantities were returned:— Flour—l3,oß7 tons. .. Wheat—2,471,432 bushels (including 1 990,420 bushels of milling wheat). 'Oats in grain—77l.46B bushels. Returns were received covering ail stocks owned or stored by millers merchants, and farmers throughout the Dominion, with a few unimportant exceptions which would not appicciably affect the totals given. PRICE OF GOLD LONDON, December 21. Gold is quoted at £7 Is Bid a fine ounce.

Bruce Woollens continueu to be offered for sale at 13s 3d, without buyers showing any interest, and the preference issue was on offer at the firmer price of £1 3s. Ordinary contributing and preference issues of Kaiapoi Woollens were on offer at 14s 9d, 5s 9d, and 17s 6d respectively, but the only response from buyers was in respect of the last-named issue, the quotation being 16s 6d. Mosgiel Woollens improved fractionally, the closing buying offer being £9 12s 6d; sellers were reticent. There were few changes in shares in the miscellaneous section. C dinary Brown Ewings were enquired for at 18s 3d. without response from sellers: the preference issue also showed a slight improvement, buyers offering £1 2s 6d. Crystal Ices met with firmer demand at £2 2s. sellers refusing to do business under £2 7s. There was a rise of Is 6d in buying quotations for Dominion Rubbers, the closing offer being £1 11s 6d; sellers remained firm at £1 15s. New Zealand Breweries were enquired for at £2 13s 9- 1 . without sellers showing any interest. Dominion Breweries were also in demand at £ 1 19s. but sellers did not come forward. There was a slight easing in the enquiry for Tooths Breweries, buyers offering £2 14s 9d, but sellers required Is above that figure. Electrolytic Zinc preference shares met with firmer enquiry at £2 11s, as also did the ordinary issue at £2 9s 3d, but no response was received in either case. Mount Lyells were enquired for at £1 17s 6d, ex dividend, sellers asking £1 18s 9d. New Zealand mining shares remained practically unaltered, and there was no appreciable change in the quotations for Government loans.