New Zealand shares make strong gains

Press, 31 January 1983, Page 21

New Zealand shares make strong gains

BY

ADRIAN BROKKING,

commercial editor

New Zealand share prices rose some 3.5 per cent last week in-fairly active trading, bringing the NZU index level to 666 - a figure last seen on August 30 when the market staged a brief rally and reached this level for just one day. At this stage the reason for the market's strong performance would appear to be mainly technical. Scrip is in short supply, because so many listed companies last year acquired large holdings in one another. These shares are locked away and unavailable. Also, the institutions' seem to have returned to the sharemarket in a quiet way,

after having clarified their tax position and presumably decided on an investment strategy. I believe that some of them are now interested in buying shares for their taxfree dividends; to that extent these will now be exhausted more quickly. Interest rates continue to fall, and this of itself is a good reason for rising share prices, quite apart from a possible freeing of funds. In any case, conditions in the money market are of a high level of liquidity. The Reserve Bank has raised the trading banks' reserve asset ratio — the amount of cash they must

hold in government securities — from 21 to 26 per cent of deposits. This, however, is not expected to halt the downward trend of the interest rates the banks are offering for deposits. The country no doubt will face a difficult first half year in 1983, but there are’ encouraging signs that the United States economy is on the mend. This would stimulate the economic recovery for the rest of the world, although New Zealand’s export prices for basic commodities such as meat, wool, and wood pulp traditionally lag behind overseas developments by many months.