COMMERCIAL Review Of Week’s Stock Exchange Transactions

Press, Volume CI, Issue 29983, 19 November 1962, Page 16

COMMERCIAL Review Of Week’s Stock Exchange Transactions

'By Our Commercial Editor) New Zealand shares again made slightly more losses than gains in last week’s trading. As in the previous week, however, the margin was small and no definite trend was apparent. The week’s tally shows 29 gains and 34 falls by New Zealand shares and rights. A closer examination of the list, however, shows that more of the leaders appeared among the rises than among the falls.

In line with the easier trend in Australia, overseas shares traded on the New Zealand market showed a definitely weaker tendency. A.C.1., Ampol, 8.H.P., G. J. Coles, and Myers were among the leading issues which finished lower on the week.

Notable among the week’s falls were the three insurance

shares. National New Zealand and South British. National which rose from 25s to 35s earlier this year, slipped back a further Is to 31s 6d. Speculative hopes of a take-over bid from one of the other two companies have so far been disappointed. N.Z. Refining The public share issue by the New Zealand Refining Company, which Opened on November 1, has been perhaps the biggest single factor in the market for the last month or so This was the largest flotation of its kind ever attempted in New Zealand; nearly £1 million was subscribed by the public. Opening business in the 10s paid shares was written at 10s 6d and 10s 5d (in Christchurch) and Us (in Wellington). That the shares should open at a premium when the subscription lists were open for 12 days may seem anomalous. but there are special circumstances in this case.

Firstly, it appears that the oil companies—the original shareholders—would gladly have subscribed all the capital. to the exclusion of the individual investor.

The cornpanies were, presumably excluded from the public issue; but are they prevented from buying shares on tl«e open market? If not, they may well have agreed to take any shares available at. a certain price (par?), to be shared pro rata among themselves

Apart from the possibility of the oil companies supporting the market, there are Indications that some would-be investors refrained from applying for an allotment in the hope of the shares opening at a discount

On the other side of the scales, of course, are the stags, some of whom optimistically applied for twice as many ■hares as they expected to be allotted.

Recorded business to date totals only 750 shares and it is too early to assess the pressure of buying or the weight of selling. But, unless stags flood the market with selling orders as they receive their allotment letters, the immediate prospect is for the continuation of a modest premium. Overseas London stock markets were in a buoyant mood last week and buyers were generally encouraged by a number of factors—not least being the Government's expanding economic measures—according to a London cable. Record export figures and reports of a good steel output also helped the market Gains in equity shares were widespread on the week and many were quite sharp. Several international and TransAtlantic favourites moved up well. However, ths advance of the equities was at the expense of the fixed interest counters. The switch from gilt-edged brought about some sharp declines and war loans

were a point lower on the week.

Banking shares moved up with other sections and insurances, properties and stores showed to advantage. Dealings started during the week in British Australian Investment Trust and although moving quietly, ruled slightly above the 5s issue price. Market leaders lacked strength when the Melbourne Stock Exchange closed for the week, but second rank stocks were generally steady. Both British Tobacco and A.C.I. lost more ground. Oils were steady, with Clarence River showing further improvement Base metals were quieter and showed little change.

Clarence River dominated the oils section on the Sydney Stock Exchange, while A.O.G. slipped back on the last day’s trading. Most other oil shares were steady in an active market.

Industrials were firmer on higher turn-over, apart from A.C.I. and B.H.P. W. R. Carpenter rights opened and were heavily traded, closing at 14s 6d.

Blue Chip Or Spec.? Although the group profit of Skellerup Industries, Ltdshowed an 8.9 per cent, fall in the latest year, the share of the profit attributable to Skellerup shareholders actually role 22.4 per cent The apparent contradiction is explained by the lower proportion of the profit reserved for minority interests this year, and by the non-appear-ance in this year’s group accounts of pre-acquisition profits by subsidiaries. The market is still undecided how the Skellerup £1 ordinary stock units—listed in June last year—should be valued. Judged on dividend yield, they are the bluest of blue chips, but on the basis of their price/earning ratio (price divided by earnings a share) they are in the speculative class.

In the following table, these two ratios for Skellerup and seven other leading New Zealand equities are compared:—

The dividend yield suggests that Skellerup stock is over-priced, making full allowance for the company’s financial strength and dominant position in the rubber manufacturing industry. The long-term investor, however, looks to earnings rather than immediate return, and on this basis, the Skellerup stock is very conservatively valued.

A bonus issue of the order of one for two would—providing the profit and divi-

dend rates were maintained — bring the stock more into line with others in this list. Even though the price/earning ratio is so low, the dividend yield suggests that the market is anticipating something of this sort Gilt-Edged Yields Average yields to final maturity on Government stock rose last week. Average short term yield was 8d up at £4 14s lOd, while average medium term at £5 2s 9d and average long term at £5 3s 4d were both 2d higher. Yields to maturity on Government stock traded in

Christchurch last week are as follows: 3 per cent 196163, £4 14s 2d per cent.; 43 per cent. 1962-63, £4 13s 5d per cent.; 4 3-8 per cent. 15/11/1963, £4 14s 9d per cent.; 3 per cent. 1961-64, £4 9s 3d per cent.; 43 per cent. 15/6/1965, £4 Ils 7d per cent, and £4 Ils 6d per cent. Details of transactions on the Christchurch Stock Exchange last week were as follows: Government stock, £10.725 (compared with £4295 the previous week); local body and company stock and debentures, £3OOO (£1400); banks, 2067 (140); breweries, 4750 (3700); frozen meat, 1020 (700); gas, nil (700); insurance, 700 (nil); loan and agency, 7450 (7300); miscellaneous (Australian)

14.965 (6000); miscellaneous (New Zealand), 16,029 (10,339); mining, 500 (nil); unlisted 100 (nil); total 49,781 (30,529).

RESERVE BANK £l.7m Fall In Sterling Sterling and other exchange held by the Reserve Bank fell £l.7m to £40.7m last week when the seasonal drain on overseas funds continued. There was no change in the bank's holding of gold or overseas investments. Net Government indebtedness was reduced by £o.7m. Trading banks’ deposits with the Reserve Bank were reduced by £2.9m and their borrowings from the Reserve Bank were increased by fil.lm. Main Items from the latest week's return, with the previous week's figures, are as fol-

Div. Price Yield % Earnings Skellerup .. 2.4 8 Wr. Steph. .. 6.3 10 For. Prod. .. 5.6 12 Tasman 13 Dom. Br. .. 3.1 17 W'wths N.Z. 4.7 17 N.Z. Ins. .. 5.4 17 N.Z. Br. .. 4.6 18 S. Brit 3.5 20

lows:— Liabilities Nov. 14 Nov. 7 £000 £000 Bank notes 85,424 83,410 Demand Liabilities— State 10,333 12,185 Marketing .. 1,393 1,340 Tr. banks 69,747 72,667 Other 1,992 4,640 Assets Reserves— Gold 244 244 Stg. exch. .. 40,172 41,868 Other exch. 553 600 Investments— Overseas 16,442 16,442 In N.Z. 70,123 70,132 AdvancedState 17,627 20,207 Market orgn’s 24262 25,864 Other 7,070 5,985 Other assets .. 1,498 1,774