DROP IN VALUES

Dominion, Volume 24, Issue 290, 3 September 1931, Page 8

DROP IN VALUES

Government Securities CAUSE EXPLAINED Heavy Australian Sales Dominion Special Service. Dunedin, September 2. The recent drop In the price of New Zealand Government securities was referred to at this morning’s meeting of the Dunedin Stock Exchange by the chairman, Mr. Harman Reeves. “Members of the Stock Exchange and the investing public,” said Mr. Reeves, “will no doubt be considerably perturbed at the sudden drop In New Zealand Government securities. For the Information of those not in a position to know, I might explain that a cause of this fall is the large blocks of New Zealand Government 5| per cent. 1933 and 5i per cent 1927 and 1951 bonds and stocks, and in some cases 4} per cent, free-of-tax bonds, that are being offered from Australia at very much lower prices than those recently offered on this market. “The setting up of a special committee by Parliament to go into the finances of the Dominion has caused an uneasy feeling among holders of these stocks in Australia, and they are seizing the opportunity of the existing high rates of exchange to dispose of their holdings' in New Zealand. Australian holders can offer to take £95 for their stock in New Zealand, and yet receive In Australia over £ll3 per hundred, the reason being, of course, that the exchange at £lB/12/6 Is In their favour. Half Per Cent Interest Drop. “Toward the end of July It was announced by the Minister of Finance that the loans then being offered for public subscription at 5j per cent., with currency to 1937, would close on July 31, and after that date no higher rate of interest than 5 per cent, would be offered,” said Mr. Reeves. “As a result large sums of money were obtained by the Government from all over the Dominion, and applications were made by large and small investors. A few days after the closing of this loan these securities were selling as high as £lOO/10/on the market. Later a special committee was set up by Parliament to consider the finances of the Dominion and advise the Government. Rumours immediately began to circulate that there was a possibility of the Government reducing the rate.of interest, as had been done in Australia. “I would ask members to take no notice whatever of these and to refute them whenever possible,” Mr. Reeves said. “The reputation of New Zealand stands too high for the Government of the country to Interfere or try to cancel contracts already entered into in regard to rates of interest. This would amount to repudiation, and the good name of New Zealand would be gone for ever in both Australian and London financial circles. Our position Is entirely different from that of Australia. Our Government stocks until recently remained high around par; Australian stocks had fallen so low in Australia and London, and the market was so unstable, that holders welcomed the scheme for conversion at reduced rates. It stabilised the market, and holders will now know the value of their securities; previously they did not know from day to day what they were worth.”