Market remains weaker

Press, 21 August 1978, Page 14

Market remains weaker

By

ADRIAN BROKKING,

commercial editor

The New Zealand sharemarket continued to weaken last week, in moderately active trading. Apart from the operation of technical factors — discussed here several times already — the easier trend was no doubt a reaction to statements by the Minister of Finance (Mr Muldoon) early in the week. The Government measures, announced on Monday, to raise interest rates on Government stock are likely to put a halt to the recent falling trend in interest rates, i The measures aim to mop up liquidity, and the likely result is that funds available for investment will be reduced.

Together with the greater attraction of fixed interest investments, this will mean much less money available for investment in shares. Later in the week Mr Muldoon seemed to confirm the fear of many businessmen when he said that “my present thinking” was that the trading stock valuation adjustment would not be repeated. This is bad news for the share market, as it would adversely affect the profita-

bility of many companies in the current financial year. Meanwhile, most market interest continues to centre around second-line stocks. A. B. Consolidated Holdings, Ltd, the troubled Christchurch-based producer of biscuits, confectionery, and snack foods, was the centre of some astonishing events last week.

The Canterbury Trades Council — the local trade unions — gave notice of a proposal to find a buyer, if they could look at the books first and if the majority shareholders would accept time payment, with the money generated by its own assets.

I regret that this sounds vague, but that is the best that can be said for the proposal: that it is vague, naive, and unrealistic.

The loss of 250 jobs is a matter of great concern for the community, and I have great sympathy for the trade unions’ endeavours to find a way out.

But it cannot be right to continue a loss-making operation at the expense of the total enterprise and so jeopardise even more jobs. Any idea of a business

run either by the workers themselves or by the unions should be discarded; it would be disastrous for workers and unions involved. I know that this sort of thing has been done in Australia on a few occasions, but the A.C.T.U. picked winners, while the confectionery situation at Aulsebrooks is a loser.

The minority shareholders of A. B. — mainly small investors — cannot'be blamed for feeling locked in: and a number of phone calls received last week clearly showed that many of them are apprehensive. The chairman of A. B. (Mr B. R. Judge) said during the week in no uncertain manner that he was very much aware of his duty and re-

sponsibility to the minority shareholders, and that he had no intention of leaving them in the lurch.

The minority shareholders have had a bad deal over the years, and one has to wonder at the pluck of those that have stayed with the company for so long. Friday’s offer from Moana Estates is another chance for them to get out of their investment at better than market prices. Needless to say, they should wait for the recommendation of their directors. In making this recommendation, the directors will have to lay things on the line, and shareholders should be able to assess much more clearly what they stand to lose or to gain.