Debate On Speculation Seems To Be Settling Down

Press, Volume CIX, Issue 32217, 9 February 1970, Page 12

Debate On Speculation Seems To Be Settling Down

(By the commercial editor)

Statements bewailing excessive speculation in shares> and attributing the responsibility* for this to various quarters, came thick and fast from all directions last week.

However, it appears that out of the debate only two facts emerge: a welcome reassurance by Mr Muldoon that no capital gains tax is contemplated, and the fact that little will be done to change the conditions' in, the present Australian sharemarket.

I The Leader of the OpposiI tion in the Australian Senate I (Mr Murphy) came out ■ strongly in favour of a Seeurities and Exchange Commission along American lines. i But most of the Australian i State Governments indicated I that they did not see any need for such a commission. • Although Mr Murphy replied promptly by rightly pointing out that the task would have to fall to the Federal Government anyway, it would seem that the matter has been nicely put to rest. At this stage it is unlikely that the Federal Government will embroil itself in in the affair. The conference of At-tomeys-General, to be held , later this month in New Zea- • land, will consider the final .form of legislation aimed at strengthening the control of , i the Governments over com- • panies and exchanges. I! This legislation was begun i: in December, well before the ( : present outbursts. I And even under present > laws the Governments have I considerable powers—as the i investigation of Endurance I Mining Corporation N.L. ordered by the AttorneyI General of New South Wales, i clearly shows. The Australian market is in the process of recovery from the apprehensions engendered by the debate, and may even continue to boom soon. And the air is perhaps a little cleaner. ■ At any rate many people have been reminded that! speculation has its dangers. Lucid Accounts It was a pleasure to work with the accounts of the New Zealand Refrigerating Company, Ltd, last week. The report by the chairman (Mr C. S. Peate) was extensive and detailed, and full of additional information, especi- ■ ally relating to the figures.

Shareholders must have found this very helpful to their understanding of the accounts and their company’s financial position—-which of course is excellent. One could only wish that all company reports and accounts were set out equally well. However, one other company’s financial statements stand out in my memory. These were by the New Zealand Farmers’ Co-operative Association of Canterbury, Ltd, whose accounts—together with the remarks of the chairman (Mr G. Gibson) also were very clear and easy to follow, and a pleasure to review.

Moreover, had there been a prize for the company which published its accounts most promptly, this prize would almost certainly have gone to The Farmers’. There was only six -weeks between balance date and the time the printed accounts reached shareholders.

But Simpson and Williams pipped The Farmers’ at the post, with an elapsed time of only five weeks—a record I think.

However, as Simpson and Williams print their own accounts. they are obviously favourably handicapped in the publishing stakes, and The Farmers’ second was a great effort. It stands to reason that prompt publication of this information is of great importance to shareholders. There must inevitably be a time

gap, but the more “on time” the financial information reaches them,' the more reliable it is to shareholders. Accounts which come to shareholders’ hands about the time when the next halfyearly report is due, are not helpful at all in the assessment of their company’s progress.

It may be interesting to note that the printed accounts of General Motors—the largest company in the world, with subsidiaries in nearly every country—were on my desk six weeks after the company ruled off its books. Hay’s Underpriced Hay’s-Wright Stephenson shares would appear to be stabilising at the 127 c level; this is 12c below the year’s peak of 139 c. Ever since the company announced that it would abolish its discount for shareholders there has been steady selling, mostly of small parcels.

Obviously many of the shares were held because of the discount, often no doubt by people who do not normally invest in shares, and these are now quitting their holdings. If a person holds only 100 shares, mainly for income—and the discount of course adds indirectly to income, then it does not matter | greatly what he sells for, as long as he gets his money out. But the shares appear to be cheap now; at the dividend of 8 per cent indicated by the directors, they yield 6.3 perl cent.

Retailing is not a growth industry of course, and in the last few years investors have retreated from the industry, as they have from some

others which used to be popular. In addition, many investors are standing off until the first consolidated accounts' are published, because it was rumoured at the time of the merger that the Wright Stephenson retail division was losing money.

In fact it was said that the merger’s purpose—as far as Wright Stephenson was concerned—was the “purchase” of management talent for the W.S. chain.

Thf: talent in Hay’s for retailing management is unquestionable, of course, even if it may be spread a bit thin because of the expansion. The caution of potential buyers is understandable. Yet in the past Hay’s has always risen to the challenge. It is one of the most progressive retailers m the country, and no doubf will succeed any difficulties which may face it today. Any investor who is looking for income should take a eJose look at the shares. Rumour Denied An incidental bit of intelligence learnt late last week is that N.Z. Forest Products, Ltd, flatly denied that there was any substance in the rumours that the company was to pay an interim dividend of 6.75 per cent.