COMMERCIAL Exchange chairmen discuss market

Press, Volume CXI, Issue 32776, 29 November 1971, Page 19

COMMERCIAL Exchange chairmen discuss market

(New Zealand Press Association)

AUCKLAND, November 26.

Shareholders should carefully review any resolutions proposed by directors to issue capital for cash without pro rata rights, said the retiring chairman of the Auckland Stock Exchange (Mr G. W. Frater) at the annual meeting of the exchange.

Mr Frater made ,his com ment in noting that it wa: the increasing practice ol companies to make place ments of large parcels ol shares off the market. In these instances conditions of stock exchange listing had been complied with in that shareholders had previously given approval for the issue of a stated limited amount of capital for cash, without a rights issue to shareholders on a pro rata basis. “During this year there were placements of new ordinary shares to selected applicants at prices below current market rates,” said Mr Frater. “This put the existing ordinary shareholders at a disadvantage, having no knowledge of the issue. An announcement was made that all shares had been taken up.” “It can be argued from the company’s point of view that such a placement creates a higher premium and consequently all shareholders eventually benefit. “But I do not entirely agree,” said Mr Frater. “The placement of shares by a company for cash is not in accordance with usual issues

i- of capital by way of a rights i is issue to existing shareholdifiers as contained in stock ex-j !-! change listing requirements,! >f and the small shareholder is I disregarded. •‘i “After all he is the one who makes the market in J 1! day-to-day trading.” r ’i Mr Frater said that where d there was an issue of new , capital by a company for the PI purpose of taking over ana: other company, and approval 'by the shareholders in genee ral meeting had been granted . previously, the existing jj shareholders did benefit. d ‘Glamour gone’ e i Referring to the sharemar--i ket generally, Mr Frater said: “Much of the former glamour e of equity capital is now not Sso evident, temporarily, 1 1 hope.” He said that during the last e year the share market had t suffered some quite definite a slides downward, followed by ■ a levelling off. s Turnovers were lower and the speculative mining marV ket very quiet, although in e the last two months ordinary a industrial shares showed i| signs of improvement on ins creased turnover.

i Adverse factors had been [the discriminatory tax on income from risk capital, payroll tax, industrial troubles, and the heavy raisings of fixed interest capital by industry, the servicing of which in present conditions was taking a larger share of profit. Ordinary risk capital was the mainspring of economic progress, providing the means whereby jobs and prosperity were created, said Mr Frater. But he wondered if this was ever given consideration by union leaders in the increasing demands for higher wages and benefits. He said the stock exchange was narrowing its trading area where it should be expanding its markets to cope with necessary patterns of investment. The Government and Treasury by regulation and practice had created a captive market of Government and local body stocks. The yields of these stocks was completely out of line with, and much less than, rates of interest on commercial stocks.! The chairman noted that! the presentation of recorded' turnover of shares on the! market, a useful tool for; brokers and market analysts,! had been introduced for the first time at the Auckland Stock Exchange on Thursday.

The turnover, on a day of moderate trading, was 69,250 shares.