STOCK EXCHANGE YEAR

Press, Volume LXXXV, Issue 25995, 24 December 1949, Page 9

STOCK EXCHANGE YEAR

FACTORS AFFECTING MARKETS PROMISING PERIOD AHEAD (By Our Commercial Editor.) The Stock Exchange year, which ended yesterday, was marked by notable events affecting the sharemarket and more particularly its future. The devaluation of sterling took place in August. * This had no apparent immediate effect on prices of New Zealand securities. The New Zealand Labour Government, which had been m power for 14 years, was defeated at the polls. Less than a month has passed since this reverse to Labour, and share prices have not yet been fully reflected in actual dealings. However, quotations for most shares have been appreciably firmer. Some shares, notably insurances, had appreciated a little before the election, in anticipation of a change of Government. The Australian Federal elections also resulted in an overthrow of Labour and the sharemarket in the Commonwealth generally closed the year on a very firm note. The threats of further measures of socialism and nationalisation are now removed, and investors generally may look forward to the future with a greater degree of confidence, and with the knowledge that thrift still pays dividends. In New Zealand references to the chance of an approaching depression were frequently made during the year in polilical propaganda circles. In America there appeared to be a degree of belief in this possibility, and this had its reflection throughout trade circles and in share prices. However, towards the close of the year the depression bogy seemed to be effectively dispelled, and share prices ■ showed substantial gains in heavy trading to the highest levels in approximately three years. Movement of Prices The following tables show the movement of share prices in New Zealand:— (Base—average prices in each group in 1938 equals 1000)

Annual average .. 1,010 1,520 •Interpolated. Affairs Abroad In England there has been a lack of confidence in commercial circles in the Attlee Government, and most sensational falls occurred in British Government loans. The devaluation of sterling was naturally the most outstanding event of the year. Devaluation is at the best an artificial remedy. The true remedy must be an active policy of adjusting output to wages and wages to output. As an overseas writer puts it, devaluation can only be looked upon as another milestone on the downward path of a “Rake’s Progress,” and not, as at one time seemed possible, as a turning point at which the nation would retrace its steps to the harder ways which' in the past have led to prosperity. New political doctrines have in fact emerged which may call for some modification in the application of the nation's principles of investment. The main characteristic of the stage through which the nation is now passing is that, having embarked on a redistribution of wealth, it is vainly seeking to avoid the consequences of whittling down the incentives to production. Gilt-edged stocks must remain weak until Britain’s international trade is balanced and confidence is restored in the international value of sterling. Then, and only then, can British Government stocks stage a recovery commensurate with the losses which have been suffered.

British industry has already entered a period of tension which seems likely to become more acute because of the persistent clash between political theory and economic practice.i According to one leading. British authority -the prosperity of the Country can be based only on the prosperity of industry, and yet the Goverrnment employs every device to penalise those who invest in the country’s welfare, restricting as it does the earning of profits and imposing on the proprietors of business enterprises conditions for which there is no economic justification. The scope for the employment of capital at home is becoming more and more circumscribed, and investors are being reluctantly forced to a conclusion that the objects of investment can no longer be fully attained in the United Kingdom. The General Election in Great Britain may bring th'e reversal of policy so urgently needed to restore the country’s economic position, although the electorate as a whole has, says the authority quoted, shown little desire to face the real issues without prejudice or favour. A worsening of the situation between now and next spring may at least bring home the gravity of the danger of a relapse into real poverty, for which Socialism is no cure, nor Communism an alternative. The British public as a whole is always slow to think and inarticulate in expressing the truths which it holds most dear; it is intensely suspicious of one section of the community taking an unfair advantage over another. It is fully determined, however, not to commit mass suicide for the sake of a political chimera.* nor is it frightened of the hard work and short commons which may have to be endured for th’e building of a better world. The phase through which the people of Britain are still passing has not yet spent itself, but the time must surely come again when investment will be encouraged as one of the most indispensable factors in industrial activity and in the real welfare of the community. Closing Week in Christchurch The closing week of the year on the Christchurch Stock Exchange provided little business but very firm quotations. Brokers and their clients are as a rule disinclined to enter into contracts too close to Christmas. Locally, as the year ends, a feeling of confidence seems to prevail, and expectations are that in 1950 there will be increased business and a greater degree of freedom in dealings in overseas shares. During the week buyers were in the market for nearly all Government stock issues, but prices offered were in the main on the low side. The week’s turnover at 2500 shares was 4475 below that of the previous week. Details, with the previous week’s figures in parenthesis, are:—Government securities, £6675 (£1850); bank shares, 110 (50); breweries, 380 (550); frozen meats, 160 (nil); gas, 200 (nil); insurance, nil (1350); loans and agency, nil (150); woollens, nil (1000): miscellaneous, 1050 (3375); mining. 500 (500); unlisted. 100 (900).'

Group. Year ended Sept. 30, 1942. 1948. 949. Frozen meat 1,105 2,102 2,026 Woollens 1,397 1,968 1,809 Gas 782 882 863 Timber 1,050 1,605 1,467 Minerals 991 1,327 1,321 Miscellaneous— Industrial (incl. # breweries 995 1,424 1,319 , . ~ ... All industrial groups 1,000 1,449 ,373 Banks 887 1.199 ,085 Insurance 1,207 1,787 ,732 Loan and Agency .. 882 1,725 .701 Miscellaneous 1,021 1,901 .875 — . i All groups combined 999 1,538 1,463 All Groups Index (base 1938 equals 1000) Month. 1942. 1948. 949. January 1,000 1,575 ,487 February 967 1,545 ,470 March , 940 1,501 ,449 April 971 1,515 .442 May 961 1,541 .466 June .. 964 1,548 ,445 July 1,000 1,541 ,447 August 1,028 1,492 ,450 September 1,039 1.493 ,466 October 1,060 1.495 — November 1,082 1,499 — December 1,098* 1,494* —