COMMERCIAL Review Of Year’s Stock Exchange Transactions

Press, Volume CIV, Issue 30943, 27 December 1965, Page 11

COMMERCIAL Review Of Year’s Stock Exchange Transactions

Beginning, hopefully, on a bustling boom of bonus optimism, the year on the New Zealand share market is closing, restrainedly, with any prospects strictly long-term.

Apart from the flurry in the first few weeks of trading when share prices soared to a peak of 1668 on the Reserve Bank index, the year has not been a happy one.

Once bonus hopes had been fulfilled or dashed, investors had to do some serious thinking about the share market and what approaches should be used.

As the year closes there is an even bigger question mark over what lies ahead. There is concern about the state of New Zealand’s overseas reserves and also about what further measures of restraint are likely to be imposed. Demand for imports has been running high, while, at the same time, export earnings have been levelling off. As early as February this year the Prime Minister was calling for a slow-down in Government spending to hold demand in check. More recently the Prime Minister has expressed optimism on export earning for the current year. It must not be forgotten that the coming year is an election year and that the hand of restraint may be in a velvet glove. Since the middle of the year the credit squeeze has tightened and this has had a depressing effect on business. In turn this has meant that for most people there has been less cash for investment. At the same time there has been a spate of capital issues as companies seek more finance. New Issue However, getting in on the ground floor of new issues has not been the wisest thing to do. New issues do not seem to gladden the hearts of investors as they used to. Two recent issues, Prestige N.Z. and Motor Holdings, both placed on the market at substantial premiums, were marked down as soon as they made their share market debut. Buffeted by the credit squeeze and the lack of funds in recent months, investors have also had to face some hard facts of life in company results. First of the market-shaking announcements was that from Enzlon —formerly Von Kohorn saying that the company was going through a difficult period with a shortage of working capital. The company was also finding the New Zealand market hard to penetrate and was losing the help of its American sponsor. There was tremendous public interest when Von Kohorn was floated in 1963 and the issue of I.Bm 5s ordinary shares was hopelessly oversubscribed. After the news of Enzlon’s difficulties the shares sold as low as Is 6d, but there has been a slow recovery in recent weeks. Proof positive that the tele-

vision boom had burst came with the passing of the interim dividend by Pye Electronics in mid-November. Not only did the announcement depress television stocks, but, coming at the same time as the bad news from Enzlon, it affected the whole of the market. Short-term prospects for frozen meat shares seem gloomy as the year closes. Canterbury Frozen Meat has reported a loss, while R. and W. Hellaby and Southland Frozen Meat have shown sharp falls in profit. New Zealand Refrigerating has yet to declare its results for the year. Frozen meats, it seems, are also for the long term. It may be as well to recall the happier days at the start of the year. Investors will long remember the first quarter of this year as the time of the bonus bonanza. Companies had until March 31 to make tax-free bonus issues from pre-1958 profits. Disappointment But as time ran out the seam began petering out, too, and disappointment began to take the place of hope. This change from optimism to uncertainty was sketched on the index of New Zealand share prices in the first quarter. Speculation on bonus issue prospects pushed the New Zealand share price index up to a peak in early February. This speculation gave the New Zealand share market a buoyancy that was not to be sustained. For a short time the bright tone of the market seemed also to give a lift to Australian shares traded in New Zealand. Australian issues began a recovery at the start of the year, but the decline came before New Zealand shares reached their peak. In many cases prices of New Zealand shares anticipated possible bonus issues. The down-turn came when companies began announcing that future dividends could be based only on results. Then some directors told shareholders that bonus issues were being made just to take advantage of the legislation. Good Points The chairman of the Christchurch Stock Exchange (Mr T. J. Chamberlain) made some very relevant points on these bonus issues late this year. Speaking at the exchange annual meeting, he said that

directors could not be said to have been free to exercise a completely unbiassed decision on what was best for their companies. Issues were made that were determined only by the dateline of the legislation. These issues were made without considering whether earning capacity was sufficient to service dividends on the increased capital created, he said. The truth in his words is becoming more and more apparent.