COMMERCIAL Switch To Aust. Shares Results In Premiums

Press, Volume CVIII, Issue 31660, 22 April 1968, Page 13

COMMERCIAL Switch To Aust. Shares Results In Premiums

A move back to Australian shares—especially those in the mining sector—became apparent in the three days of trading on New Zealand stock exchanges last week. For the first time since soon after devaluation in November of last year, premiums began creeping into the most popular Australian shares.

Broken Hill Proprietary, for instance, closed in Melbourne on Thursday 5c lower at 1995 c and was unchanged in Sydney at 2000 c, yet sales in New Zealand on Friday morning before the Australian exchanges were open were round 2025 c—a premium of about 1.3 per cent.

Early sales in Sydney were made at 2000 c for B.H.P. yet the margin was maintained in New Zealand, although later ill the day some confusion occurred because of the sharp 50c rise to a closing price of 2050 c in Sydney and Melbourne.

B.H.P. was not the only share to show a slight premium. Others, and their premiums, were:—

It is too early to form a conclusion from this but more interest was shown in Australian shares in the three days of trading than for some time.

The turnover on the Christchurch exchange was almost 12,500 issues, a daily average of about 4200, against a daily average of 2500 so far this year. Adjusting for the shortened week, the five days to February 9 would be the only week in which more Australian shares have been traded here since October last year when the devaluation scare arising from falling wool prices turned buyers to Australian stocks as a hedge. Again, this relatively high volume last week is not in it-

self conclusive bf a switch to Australian stocks, but it does conform with the mood in Australia and, to some extent, with that within New Zealand. British Buying British buying has again ; been apparent in Australian ' mining stocks. Since the Brit- . ish Budget, there had been 1 a temporary pause, partly explained by tax positioning by British investors, whose tax year began on April 5. British buying of Australian stocks last week in London was partly because of rumours of oil and nickel discoveries. Added to this, the “Economist” has urged United Kingdom investors to be more overseas minded in their selection, even of United Kingdom stock. The journal adds that the many purely domestic stocks are overvalued. This tends to suggest prolonged Investment by British buyers. Liquidity High Liquidity in Australia, too. is at a very high level and much of this will be soaked up not by the mining market alone, but also by the industrial st cks which have for some time been waiting in the wings. Good results beginning to flow from the retailers and higher motor vehicle registrations (39,000 in February against 29,000 in February 1967) point to better profits, probably higher dividends by industrial stocks. However, B.H.P. still remains the leading Australian and New Zealand stock and many questions on the company’s oil prospects in Bass Strait will be answered when the Premier of Victoria (Sir Henry Bolte) makes a statement on the position on May 1. So far, B.H.P. has given nothing to its shareholders — all the rewards have come in the way of capital gains, themselves generated by shareholders. Issue Prospect The only short-term prospect is an issue either this year or next at a premium which would be low enough to constitute a bonus to shareholders. Certainly the dividend yield of less than 1 per cent is insignificant, especially after considering tax and withholding payments for New Zealand residents. A move away from the New Zealand shares into Australian could also arise from the laek of promise offering in New Zealand share* at present The sharp rise in New Zealand share prices—about 14 per cent so far this year—has been caused largely by an embarrassing shortage of scrip in the face of a large amount of funds for investment. Little Reward Although attractive yields were offering on the sounder shares, namely leading stock, at the beginning of the year, this position ha* now been reversed and yields, and the high prices of some shares, ean offer little reward to those now buying in. la the past low yields (between 2.9 tod 4 per cent) have been tolerated because of the possibility of attractive issues, whether bonus or otherwise, and prospects of higher dividend*. Of the leading shares, only

U.E.B. and to a lesser extent, Fletcher, look under-priced. Buyers into N.Z. Forest Product* will need more than a dividend higher than the ruling 9 per cent (which gives a yield of 3.1 per cent) to make it worth while, Although this company’s Jong term prospects are undoubted. Any revival of secondary stocks raises the question of whether these companies can obtain the liquidity which will be needed this year to maintain a satisfactory growth rate. Meat Share# Meat shares, and notably Canterbury Frozen Meat and N.Z. Refrigerating, have shown advances lately, apparently on the strength of the good prices ruling up to now on Smithfield, and the higher volume of stock handled. Buyers of these shares have been chancing that lamb prices will not fall markedly for the remaining five months of the companies’ financial year, thus spoiling what so far appears to have been a good year. At 136 c, C.F.M. yields 4.8 per cent on the 6} per cent dividend, which suggests that buyers have anticipated a good profit and the prospects of a higher dividend. The same could be said Of N.Z. Refrigerating. At the latest price of 100 c—which is also the par value—the return is 6 per cent and this seems quite reasonable at this stage, even taking into account the need by this firm to have a good year to bolster its liquidity. The next two month* will be crucial for meat companies. Mt Cook Interest Mr Cook and Southern Lakes shares rose 5c to 175 c during the week to return 5.1 per cent on the 9 per cent dividend. Directors, when reporting lower half-yearly result* for the period to September 30, mentioned that the profit for the year to March 31 should be sufficient to maintain the dividend. Devaluation, of course, will help Mt Cook but an extra, although more long-term, benefit came last week in the recommendation* of the United States Civil Aeronautics Board’s examiner for trans-Paclfic air travel. Briefly, Eastern Airlines, which has probably the largest air network on America’s Atlantic coast, has won a franchise for flights to the Pacific, including Sydney, Melbourne and Auckland. Eastern apparently ha* plans for a big hotel in Auckland and this seems the starting point for a major expansion of tourism from America to Australia and New Zealand, especially as it could lead to reduced air fares. Must Benefit This new air traffic ahould begin early in the 1970 s and must benefit Mount Cook and Southern Lakes. At the moment, it appears that there will be considerably more hotel accommodation in the northern part of New Zealand and a lack of it in the South Island—this will be One of the problem! facing Mount Cook and Southern Lakes. One way to overcome this problem would be for the group to provide its own accommodation but whatever happens, this company should undergo considerable expansion in the next few yean, with benefits accruing to shareholders.

Aust N.Z. Prem. Price Price c c /o Ampol .. 119 121 1.7 C.S.R. .. 475 493 3.7 Bora! .. 160 163 1.9 Feltex .. 67 68 1.5 Mt Isa .. 588 600 2.0