Financiers welcome end of KISS

Press, 17 June 1983, Page 4

Financiers welcome end of KISS

PA Wellington The Kiwi Savings Stock scheme which closed yesterday was unlikely to be repeated, said the Prime Minister, Mr Muldoon.

“You can kiss KISS goodbye,” he said yesterday, a few hours before the heavily subscribed issue was taken off the market. “I don’t think there are going to be any more KISSes.”

Future Government stock would be “seperate and distinct,” he said. “It may have some of the features of the one we have just had but I doubt that it will be called by the same name.” The closing of the issue was widely welcomed by financiers and politicians. The leader of the Opposition, Mr Lange, said he doubted that interest rates would fall because of the scheme’s closing. Mr Lange said yesterday that although the withdrawal of the scheme took a “disruptive factor” away from the financial market it also added uncertainty because the Government had said it would return to the market after a short gap.

Social Credit’s leader, Mr Beetham, said that KISS had been destructive and had added $l5O to the annual tax bill of every family in New Zealand.

Mr Beetham said that Mr Muldoon’s hope that interest rates would fall was “little more than pious hypocrisy — it was Kiwi stock that more than anything else was keeping them up.” B.N.Z. Finance yesterday eased some debenture stock rates after the announcement that the scheme would end yesterday. The company trimmed its rates either by half of 1 per cent or 1 per cent on investments of one year or over for debenture stock in its current prospectus. At lunchtime yesterday total investment in the stock stood at $l2Ol million and Reserve Bank officials said applications worth some $7O million had still to be processed.

Withdrawals stood at $117.1 million and officials said final calculations on the amount taken in and kept in during the 13 weeks it was on offer would be completed as soon as possible. The Government will now face regular payouts in excess of $lBO million annually in interest on the money raised.

The chairman of the Finance Houses Association, Mr M. J. Wells, said the closing of the scheme should remove upward pressure on interest rates and smooth

out distortions, particularly in the short-term money market.

“Members of the association hope the Minister of Finance will decide in a climate of falling rates to introduce tendering of Government stock.” The chairman of the Bankers’ Association, Mr W. J. Shaw, said the stock had been very successful from a Government viewpoint but dislocating as far as the financial community was concerned — because it took in such a large sum in a short time. “Its withdrawal will let the market settle down. I still look forward, however, to a freer market,” he said. “There is still a large sum of money to be processed in respect of the stock and so it is too early to say what it will do to interest rates.

“Wholesale rates will be the first sums to react and other rates will follow behind that. A lower interest rate structure will be very beneficial to the country. But if the Government returns of the market the conditions attached to the stock, and the public perception to them, will exert an influence on the future course of interest rates.”

Any future Government

issue should be pitched at such a level as to ensure a smooth flow of funds into it rather than a surge flow of cash.

“The Kiwi stock has, however, skimmed off excess liquidity in the system and that was the objective.”

The chief accountant at the Reserve Bank, Mr O. G. Scott, said the last Government stock issue to get such a public response was one in 1978 which brought in about $350 to $4OO million. The demand for KISS had been such that the bank had been forced to hire temporary workers to handle the extra flow of work. Mr Scott said he believed about 40 per cent to 50 per cent of funds invested in it came from corporations and institutes.

The 0.75 per cent brokersage rate paid to agents for the sale of the stock had been set, he said, in order to give a strong incentive for agents to sell it.

“We have no evidence of interest rate enhancement,” he said, referring to claims that some agents were rebating commissions to clients in a way which would boost the interest rate the client could obtain, particularly if he sold after qualifying for interest and then bought again.