Brokers Bewildered By Bombshell In Budget

Press, Volume CVI, Issue 31090, 20 June 1966, Page 17

Brokers Bewildered By Bombshell In Budget

(By Out Commercial Staff)

Brokers were bewildered on Friday by a seemingly innocent-looking clause in the Budget, presented by the Minister of Finance (Mr Lake) the evening before, that forced the suspension of quotation of overseas stocks and caused business to grind almost to a standstill. They stood around at the trading sessions on the Christchurch Stock Exchange on Friday, almost as though there had been a death in the family, talking about the future of the market.

They were considering the implications of the Budget clause forbidding the sale of overseas securities in New Zealand currency—a substantial part of their dealings.

But they will have to wait —at least until late today,, after the talks between the stock exchange chairmen and the Reserve Bank—to have a clearer definition of what Mr Lake may have intended. Obviously the Christchurch Stock Exchange chairman (Mr T. J. Chamberlain) realised the clause packed something of a punch; he would not be drawn on Budget comment on Thursday evening before he had a chance to study it more closely. The big question is: where does the market go from here? The gloomiest view is that trading in British and Australian stocks on New Zealand stock exchanges is finished. But it is more likely that at today’s meeting some way will be found for orthodox trading by investors to continue. If not at today’s talks, certainly at some subsequent meeting. Mr Lake, it would seem, has clamped down on transactions

circumventing overseas exchange regulations—few of which would have gone through the stock exchanges anyway—and has caught up the genuine investor in his net, too. Unless the investor has his freedom guaranteed it will make something of a mockery of the principle of a free market on the stock exchanges of New Zealand. Meantime the genuine investor is hard hit. There are many good reasons for overseas stocks being in an investor’s portfolio from time to time. Institutions and unit trusts will suffer along with private investors, because most of these have large holdings in Australian and other overseas shares. Administration of estate holding overseas stocks will be made more difficult by the new moves. Investors offered new issues by overseas companies will have to do some complicated calculations to determine how

many rights they need sell so that they will be able to take up part of what they are offered.

Any machinery that will allow investment in overseas stocks to continue would be welcome but it cannot avoid being cumbersome.