COMMERCIAL

Press, Volume LXXXIII, Issue 25380, 31 December 1947, Page 6

COMMERCIAL

STOCK EXCHANGE YEAR OUTLOOK FOR 1948 [By Our Commercial Editor.! The most notable event in stock exchange circles during the year was tiie announcement by the . a ]j ernment of its intention to nationaUse ail trading banks in the Commonwealth, ana, this has caused all investors no little auscern in New Zealand as well as Aus tralia. The threht is still in existence and consequently unless it is removed only light trading can be expected m bank Sh With this exception, the year has not had Ynanv noteworthy movements. The turnover ‘ handled by the Chri ®t ch urch Stock Exchange has been reasonably good and, over the year, the volume of business fairly well spread.. Prices have in the main remained firm Tmd in pecernber several stocks—notably Mount Lyells, Broken Hills and Colonial Sugars—reached their ‘highest point for the year. The record prices being paid for wool will no doubt have a favourable effect on the stock exchange, in that a portion of the proceeds of the current seasons clip is bound to find its way on to the investment market, thereby ensuring some degree of stability. The buoyancy of most stocks traded on the Christchurch Stock Exchange is reflected in the fallowing table giving in approximate figures the prices of a number of popular stocks as at the beginning and the end of 1947: Beginning Erfd of

Effect of Credit Control Looking to the future, it is irripossible to dismiss from consideration the recent tightening-up by the Reserve Bank of regulations restricting activities of trading banks operating in New Zealand. The regulations are such that fresh advances by the banks for almost all purposes will be controlled very stringently. It will consequently be necessary for companies which have in the past relied upon bank overdraft or other externally borrowed moneys to go to the public or the private individual for additional share capital. No doubt during the coming year many companies trading on the stock exchange will be forced to make new issues to finance any expansion of business, and to keep their overdrafts and other commitments within more modest limits.

It is thus possible that whereas in the past year investors have been prepared to accept something like 3J per cent, on money invested by thein in more or less first-class preference shares, they may be inclined to change over to new issues in well-established companies where the interest rate offered is 4J per cent, or more In time the natural result of this changeover may be a rising in the rates of interest returns on preference shares and a consequent slight levelling down of share prices. • Another factor induced by the Reserve Bank’s control of banking credit is that while rates of taxation have been, and still are, so high, it has, in the main, been an advantage in the case of companies with a relatively small share capital to work on borrowed capital and pay interest thereon to the banks, because the interest so paid out is an allowable deduction from assessable income. When companies financing on this basis come to replace borrowed moneys with share capital they will be faced with the situation that it takes a much larger profit to pay the same rate of dividend.

A form of inflation which does not hit the public eye immediately is State acquisition of private enterprises such as the taking over of the Bank of New Zealand and the coal mines of th? Dominion. Payment in such cases is effected by means of bank notes or the issue of Government stock, both in effect forms of inflation. Because of the Government’s avowed intention to insulate the country against inflation so far as is possible, the feeling exists in the business community at the present time that large State acquisitions of private enterprises, are not likely in the immediate future. Only recently the Government- refused the option of purchasing the Devonport Steam Ferry, Bus Service. It has, too, postponed its projected legislation for the nationalisation of coal mines in the Dominion.

WORLD OUTLOOK Reference to the world outlook on economic affairs was made by the chairman, Sir Frederick Tout, at the annual meeting of the Bank of New South Wales recently. "The progress of economic recovery throughout the world as a whole during the last 12 months has been disappointing,” he said. "Machinery for political and economic collaboration between the nations has failed so far to work smoothly, but the dislocations and distortions of total world war cannot be set right in a matter of two years. For the present the best we can hope for are temporary expedients and provisional policies to overcome the most serious problems confronting the world. “The core of the problem of recovery lies in Europe, where production is hampered by food shortages, lack of equipment, political uncertainty and exchange difficulties. “In particular the plight of Great Britain, the anchor of resistance against the enemy during the war, calls for the sympathy and active help of the rest of the world. Her recurrent crises, however much they may have been accentuated by unwise policies, have arisen from her efforts to carry out responsibilities too heavy for a war-weakened economy. She has tried, prematurely, to return to ’normal’ practices of multilateral trade on the strength of American financial help, much of the value of which has been dissipated by the rise in American prices. “Employment and economic activity in America continue at an unprecedentedly high level. One cannot but feel that there is an uncertain note about this prosperity. Prices have risen to levels which will oe difficult to sustain, though the large Imsatisfied world demand for American goods may prove a substantial cushion in the economy. Nevertheless, despite the great volume of aid that America has given to Britain and other European countries, world recovery—and indeed continued American prosperity—require further large measures of assistance The developments which have followed the Marshall proposals give hope that the problems involved are now at least better understood both in Europe and America. The Export Industries “The world-wide shortage of foodstuffs and other commodities has raised the export income of Australia and New Zealand to a very high level. In the present circumstances the two Dominions are assured of a virtually unlimited market at high prices for their primary products. It is by no means certain, however, that they are doing all they can to increase the flow of food supplies. Shipments of dairy produce and meat from Australia, for instance, are still lower than before the war. It is probable that with a more vigorous effort to supplement the voluntary sacrifices of a large section of the public, the Commonwealth Government could increase and speed up food shipments to the British people.”

LONDON MINING STOCKS (N.Z. Press Association—Copyright) LONDON, December 29. Quotations of mining stocks on the London Stock Exchange are as under:— Broken Hill North, 655; Broken Hill Pty., 45s 6d; Zinc Corporation, £6 Iss 3d; New Broken Hill, 395; Ityount Lyell, 26s 6d; Bulolo, £5 19s.

of year. year. £ s. d. £ s. d. Goldsbrough Mort. 1 14 6 1 16 0 Broken Hill Pty. .. 2 7 0 J 16 3 Colonial Sugar .. 54 0 0 59 10 0 Mount Morgan .. 0 7 9 0 12 0 Mount Lyell •• 119 1 15 0 A.C.I. •• •• 2 18 0 3 4 6 British TPobacco .. 2 17 0 2 13 0 N.Z. Breweries .. 2 18 0 2 15 6 Ballins Breweries .. 1 13 9 1 19 0 Woolworths, N.Z. .. 17 3 1 10 3 Macduffs .. 1 10 0 2 17 6 McKenzies .. 3 5 0 3 8 0 D.I.C. .. •• 18 0 1 14 6 N.Z. Refrig, (cont.) 0 17 0 10 0 Chch. Gas ... 17 0 17 0 N.Z.F. Co-op. ord. .. 0 8 9 0 11 3 Kaiapoi Wool .. 17 0 17 0 Dunlop Rub. (Aust.) 1 12 9 2 2 6 Electro. Zinc (ord.) 3 3 6 3 13 0 G. J. Coles 4 9 6 4 2 0 Hume Pipe .. 13 6 1OO Henry Jones ..3 3 0 3 9 0 K.P., N.Z. Drug .. 5 10 6 6 0 0