COMMERCIAL AND FINANCIAL

Evening Post, Volume LXXXV, Issue 18, 22 January 1913, Page 2

COMMERCIAL AND FINANCIAL

Evening Post Office, Wednesday. THE MONEY MARKET.— Money continues dear in London, and there does not appear to be , any immediate prospeot of the rates boing v lowered. There is less golf 4 in the Bank of England than there was a year ago, and the deposits are les%. Imperial Consols haVo declined 7s 6d on the week, and compared with a year ago they are 50s lower. All Colonial GoVernmont securities aTO also easier. Thp demand for money trade purposes is \erypro.nounced, Senile tho requirements of foreign Governments and corporations are also very large. -Canada is taking up all the available capital, and is paying comparatively, high rates for the money. The Governments of "Australasia must pay higher rates than they .hare been accustomed, and the local bodio3 who ' are unfortunate to' have loans maturing in London will be obliged to pay extreme rates for renewals. As matters stand now it spem3 likely that the Governments will -havo to pay at lcaat. 4£ per cent, and local ibodie3 54 per cent. Tho two Australasiau loans, already isEued in London thiß year, were failures, notwithstanding that many of tho influential I,oadon papers referred' to them as being attractive. Of the Queensland loan " ot" £2,000,000, tho underwriters had to take 81 per cent. According to the Daily lelegraph (London) there is more dp.mand. foi issues which have met with comparative rteglcot on their first appearance, and underwriters who hnve ■ been left with amounts of stock are. able to effect sales at a slight discount on tho issue price. UNDERWRITING. - Underwriting nowadays is not so strictly of the rtauiro of an insurance as it was" originally, aixi soino objectionable practices have' been developed. . For instance, underwriters are offered stock or shares, which they are allowed by the teri»B of fhe agreement to placo out among their » c-wh friends, and connections, and whatever amount they are thus able to dispose of counts to their individual credit when the publio issue is made., By way of a concrete example, it may bo su|jt)osod that "A"' and "B" take £l0,000"each in the bonds of a new company, the underwriting commission being, 'say, 3 per cent, in cash. "A" places JBSOOO amongst his • friends, but "B I' is not able to relieve himself of any part of his obligation in this' way. The bonds are^ issued and the underwriters are left with 50 per cent. In tho ca-e ' ,of ."A," ho- gets clear altogether, because he has placed £5000 before the .issue is, publicly made. "B," how6ver, has to take up his £5000, and hero lies the grievance. Umtcr iha old system of underwriting, all who participated in it were on the same platform as regards the amount; of risk which they run of the cublio aot subscribing for the full 'issue. ■ ' INSURANCE COMPANIES AS UNDERWRITERS. -Another movement of importance ia the growing influence of the big insurance companies on themark"t as underwriters of new issues. Formerly these institutions stood in exactly the came position as the ordinary investor making application for now_ issues in the ordinary way. It is of immense advantage to them to be able to underwrite new stocks. If tho 4 issue is a success they earn 'their commission ; if it is a failuro they may be still better pleased, for they underwrite with the idea of securing investment cheaper than the outride subscriber. Frequently they are asked to underwrite "firm," which simply means purchasing a definite amount of the stock below " the price which has been fixed for publio subscription. It is immaterial to the insurance company whether tho immediate market is good or bad so long aB it is satisfied with the security, for tho company is prepared to, hold tile stock almost 'indefinitely for the sako of the interest income. Thus the market for high-class securities has loet in the insurance companies a customer whose value it would be impossible to over-estimate, for each, insurance company ,lost must be replaced by dozens of ordinary investors to provide the same amount of applications. ' r lhu«, between the ' existence of large investors like the insurance companies^ , who participate in the underwriting, and the. knowledge on the part of oth<Sr investors that ai hew stock can often bo purchased at a slight discount after the subscriptionlist is closed, the result of the formal publio issue is not altogether an accurate indication, by itself, of the real position. Commonwealth ' bank.— This State _ institution commenced business in the six States of tho Commonwealth on Monday. Mr, Miller, the general manager, selected his staff from the officers of the joint stock banks, and altogether made 127 appoirrtnifMita, including those taken over with the State Savings Bank of Tasmania. The bank will undertake all general banking business, as is now conducted by ,the private joint stock banks. The Commonwealth Bank Act provides that a Savings Bank shall be established, and this has been arranged, the total number of agenoies open being 1891. Savings . Bank agencies have also been established at Flinders naval base, Victoria, and on H.M.B. Tingira, Rose Bay, and on the Australian warships and torpedo boat destroyers. A/ soon as the necessary forms and books can be sent forward a Savings Bank agency, prinoipally for the use of emigrants, will be established at tha- London branch of the bank, so that emigrants coming to Australia can pay their money into the Commonwealth Bank in England, and get their Savings Bank pass-book, and the money deposited will bear interest from the_ first of tho month after 1 being deposited. Arrangements will bo made for paying the money, should it be needed on reaching Australia, or at final port of destination. The rate of interest allowedon Savings Bank deposits has been fixed at 3 per cent, per annum, and the limit on which interest will be paid 19 £300. Sums up to £10 can be drawn on demand at the agency where the account is kept, and. up to £5 at anjr other agency upon satisfactory identification, and upon telegraphic advice- after the balance has lieon duly confirmed the whole sum may be withdrawn. COMMONWEALTH STATE REVENUES.—Returns from the six States tehow that their 'revenues for the halfyear ended 31st December, increased £579,851, or just over 3 per cent, on the average, as compared with a gain of 12,5 p-?r cent, in tho Commonwealth revenues. Even the 3 per cent., however, is not all a- genuine expansion, as there has boon heavier taxation in West Australia, something additional in" New South Wales, and Tasmania^ includes £47.500 of the special grant uy the Commonwealth lo that state. The figures compare as under : — ,

;-18,876,312 19,456,663 All the States show increases except Victoria.. Now South Wales shows an increase of £208,166, and Queensland £196,--906. SHIPBUILDING BOOM.— The boom in shipbuilding in the United Kingdom at tlio present time 19 unprecedented, there never having been so great a tonnage on the stocks in tho history of the industry. The following table shows how the businePS3 of shipbuilding fluctuated: —

Since December, 1908, fhore lias noen an | increase of over 1,000,000 tons under conBtruction, but an compared with Decetnbor, 1905, the increase )s only 614,309 tons. Tlip cost of building has risen about 25 per cent, wince 1910. A common way of roughly e»timating tho money valuo of an ordinary steamer is to multiply tho deadweight carrying capacjty of the voseel by tho price of steel plates. 1 THE POSITION ii PHEESE.-The

efforts of British importers _ of New Zealand cheese to maintain prices i 6 a matter of considerable importance, and will be watched \ery carefully by those interested in the trade in New Zealand. It is doubtful whether the factories her©, even with peremptory instructions to their London agents not to Sell below 625, will bo able to accomplish much. At this end it is impossible to say what has been tho make of cheese in England and Ireland; all that we do know is thatt the climatic conditions were favourable for a largo make of butter. It is very probable that there has been a- large make of cheese also. Then there is the Canadian output and the Continental output to be reckoned. But, after all, the position resolves itself into a competition between rival salesmen. On thfe'one hand, we have cheese merchants standing to lose 3s per cwt. on New Zealand on the present London quotation, and on tha other there are competitors who would not be sorry to see the loss incurred. The lattor aro not likely to help the former, and if their hands are tied with respect to New Zealand cheese, there are other cheeses with which to hold down prices. It U to be hoped, however, that success Avill ■attend _ the efforts of those desiring to .maintain, prices, for it is not to the advantage of New Zealand, to see those who handle its dairy product* make heavy losses.

:efc Deo. 1905 1906 190? 1908 1909 1910 1911 1912 No. • ... 575 ... 481 1* 425 >.' 360 '».; 331 ... 363 ... 483 ... 542 Tonnage. 1,356,756 1,166,989 958,000 764,520 913,374 1,131,503 1,579,052 1,970,065

1911. 1912. State. £ £ New South- Wales ... 7,267,173 7,475,329 Victoria 4,447,126 4,421.565 Queensland 2,881,661 3,077,567 South Australia. ... 1,980,411 2,006,147 West Australia ... 1,7b7.110 1,868,708 Tasmania 533,332 607,347