Dull Start To Year’s Share Trading

Press, Volume CVI, Issue 31269, 16 January 1967, Page 8

Dull Start To Year’s Share Trading

(By Our Commercial Staff)

The New Zealand share market made an inauspicious beginning for 1967. Trading was light over a very narrow range of issues, with sellers dominant and the price trend slightly but definitely downward.

But for the rise in the prices of Australian stocks—adjusting sharply after the holiday period to come into line with the more optimistic trend overseas—the market would have been poor indeed.

Even so, in both lists taken together, there were 35 falls against 22 rises over the short week, with leaders showing the way and the falls being slightly more substantial than rises.

In the New Zealand list falls outnumbered rises more than two to one. The last 10 trading days of 1966 showed a weaker trend and this week’s trading only takes it further. But several things occurred since trading ended for 1966 to make the market more reflective. Wool Slump The slump in wool prices accelerated, to the extent that the New Zealand Wool Commission had 58 per cent of the offering at the last Wellington wool sale passed to it, for a cash outlay .of almost £750,000. Although this is welcome support for the grower it is a temporary deprivation of vital overseas exchange to New Zealand, at a time when the country can ill afford it, Mr Holyoake said during the holidays that sterner measures might be necessary to overcome the country’s present difficulties, thereby confirming what has been said in these pages all along. Professor L. V. Castle, a member of the Monetary and Economic Council, remarked that the present difficulties could not be alleviated by monetary policy alone, and that the Government would have to resort to fiscal measures.

Investors no doubt are pondering these issues, and it would be an incurable optimist who does not think that times ahead perhaps will not be rosy. Money Lending The New Year brought important legislation for the protection of those lending money to companies. The Companies Amendment Acr, 1966, which came into force on January 1, contains extensive provisions governing the raising of money by both private and public companies. The most important deal with prospectuses and protection for debenture-holders and depositors. Trust Deed Now, no company can issue an invitation to the public to deposit or lend money

unless provision has been made in a trust deed for the appointment of an eligible body corporate as trustee for the debenture-holders. New provisions impose certain duties on the trustees, which must exercise reasonable diligence to see that the borrowing company does not commit a breach of the trust deed and to see whether the company’s assets are sufficient to discharge the debentures. To narrow previously existing loopholes, a new duty has been imposed on the borrowing company’s auditors. They now must send to the trustee copies of reports and certificates that they are required to send to the company, and to report to the company, with a copy to the trustee, when they become aware of any matter relevant to the trustee’s powers or duties. New Protection It is only this last point which will add something new for the protection of most lenders.

Last year, most of the debenture issues were made by large, well-established com-

panies, most of which were listed. Nearly all of these listed companies had trustees for their issues. A large percentage of unlisted companies seeking funds however, did not have trustees. Some subsidiary companies seeking funds by way of debentures had them guaranteed by their parent company, but no significant details about the financial soundness of the parent company were given. This new trustee provision will ensure greater protection to investors lending money to these less well-known companies. Advertising Another important point of this new Act is that there is now tighter control over advertising for funds, by way of shares or debentures, from the public. This will prevent the subscribing for shares or debentures on the strength of advertisements. The investor will have to seek a prospectus which must comply with the now considerable provisions laid down by the 1955 Act and the subsequent amendments.

From the beginning of this year every prospectus must not be dated more than six months before the date of issue of the form of application.