TWENTY TIMES OVER

Evening Post, Volume CXI, Issue 4, 5 July 1926, Page 10

TWENTY TIMES OVER

PUBLIC SNAP UP LOAN

NEW ZEALAND'S POLICY PRAISED

ATTRACTING THE GENUINE

INVESTOR.

Yesterday (writes "The Post's" London correspondent under date sth June) the allotments were available in connection with the Now Zealand Government's £6,000,000 5 per cent, loan at 98i, and they indicated that the amount had been subscribed about twenty times over. In accordance with the Bank of England's usual practice of giving special consideration to the small investor, applicants for £100 received allotment in full, but those for large amounts received on an average only about 4 per - cent of the sum applied for. The scrip was in very good demand, tho price rising very quickly to 1_ premium bid. Profit-taking by "stags" made little impression upon the price in the afternoon, the final quotation being li premium, which puts the stock on exactly a 5 per cent, basis. The."Daily Chronicle" remarks that! from the moment that the terms were known, a great success was forecasted, and while it may now be said that a better price might have been obtained! by the New Zealand Government, it is better policy to ensure success than to run the risk of a limited response by fixing a price which is not immediately attractive. The great success of the New Zealand loan is everywhere a topic of congratulatory conversation as well as of Press commment. There are rumours of another Colonial loan impending, and in view of the success of the New Zealand issue its early appearance would cause no surprise. [Note: This refers to the Victorian £3,000,000 loan offered on the same terms as New Zealand's, and also over-subscribed; but later the Commonwealth Government asked for £6,000,000 of 5 per cent, money at 99J (an increase of 1 per cent.), and 61 per cent, of this issue remained with .the underwriters.] AN EXAMPLE TO BE FOLLOWED. The wisdom of framing Dominion Governments' loans for the genuine investor, and not merely relying on being saved by the underwriter, finds expression. "The advent of the New Zealand loan," writes a house correspondent in the "Morning Post" before the flotation, "is regarded with some satisfaction in the Consol Market, where dealers have none too much stock of an attractive character to put before their brokers at such a price as will return rather more than a clean 5 per cent, on the money. Had the stock markets been dull, the newcomer might have emphasised whatever depression prevailed, for tho amount is considerable. New Zealand, however, is in any circumstances regarded with an indulgent eye as being a borrower whom the investor is usually willing to welcome, and the new stock is not likely to exercise any malign influence over prices of the Colony's existing securities. Some interest is felt as to the reception which the public will accord to the stock, for, if it should be readily absorbed, New Zealand's example is likely to be followed shortly by other borrowers. Any such, however, will do well to follow tho example as regards terms, which have obviously been framed with due regard to the facts of the situation, and the securing of absorption by the genuine investor. In the long run, that is a policy which usually pays the borrower as well as the lender. . . The loan must certainly be described as an attractive one, and comparing favourably with the existing 5 per cent, issue which, with about four months' interest, stands in the market at about 102. Moreover, the credit of New Zealand stands high here, both by reason of the general policy of the Government and also of the fact that the prospectuses always supply the investor with the fullest details as to the purpose for which the loans are raised, and also the present position of the Government's finances in all those matters which are of importance to the intending investor. Such a course, we have little doubt, will be followed in the case of the present loan." The City Editor of "The Times" 'is glad that Now Zealand, profiting by the fact that her last year's loan remained 85 per cent, with the underwriters, has this time fixed terms to secure the support of investors. Referring to last year's loan, he writes: "The size of the loan and the price of issue were out of touch with market conditions at that time, and consequently 85 per cent, was left to the underwriters. In fixing the terms of the new issue the New Zealand Government has shown that it has not failed to profit by the experience of last summer. New Zealand is one of .the few colonial borrowers who give particulars in their prospectuses of their financial position. As a result, her credit stands higher with the British investor than that o< other States

which do not give this important and necessary information. WISTFUL UNDERWRITERS. From the "Financial Times" it appears that only a few days before this more than twenty times subscribed loan was issued, some people still talked of the possibility of its being left with the underwriters. That paper writes: "For New Zealand to have secured all her money by 11 o'clock yesterday morning, and to have been able at that hour to close the subscriptions lists for her new loan, can be regarded as something of an achievement, and one which speaks eloquently of the high repute in which New Zealand as a borrower is held. Why there should have been any doubt as to New Zealand getting her money it is difficult to say, but, as reflected here last week, some people were talking about the possibility of the underwriters being left with the stock. I expect the underwriters will wish devoutly that they stood a chance of being landed with any portion of their obligation, for the stock is one of the cheapest of its kind in the colonial list, and there is certain to be a premioum on it.'' The "Manchester GGuardian" (before the flotation): "Allowing for redemption in twenty years' 'time, tho now loan gives a yield of £5 2s 6, which is distinctly favourable'compared with the return on other New Zealand Government stocks. Thus the 5 per cent, loan, 19935-45, a less attractive investment in view of the option of redemption in 1935, at the current price of 101$, inclusive of five months' accrued interest, yields only just over 5 per cent., as does the 4J per cent, loan, 1945, at the present price of 94Z, inclusive of three months' accrued dividend. In view of this fact, and of the popularity of New Zealand stocks with the investor, the prospects for the success of the present issue are regarded in the market as good." A REALLY WELL-MANAGED STATE. The Sheffield "Independent" commented: "The terms of the issue wero particularly favourable, and it would have been rather surprising if there had not been an eager demand for allotments. A 5 per cent, stock offered at 98_ has advantages over existing trustee securities which the public is ready enough to recognise. In addition, New Zealand is in a very good financial position, and enjoys great confidence. That a loan on these terms, with the solid backing of a really well-managed State, should be over-subscribed, is quite natural. '' An example of the fact that financial activity is not necessarily checked by trade stagnation is shown (says the "Morning Post") by tho great success which has attended the flotation of the New Zealand loan. Thus the City Editor: "At the time of the flotation we gave reasons for anticipating a good response from the investor, but it has exceeded all expectations, and, in view of the fact that the loan is believed to have been a good deal more than ten times covered, the market was scarcely expecting that allotment letters would be issued last night, while it is clear that the percentage of allotment in the case of the large subscribers must be a very small one. Nor, in view of the success of the New Zealand loan, is it surprising that rumours' should now be current of another fairly large colonial loan to be offered in the near future, while we should expect an interesting foreign loan for a few millions to be issued a little later on. Nor, it must be remembered, is the present trade depression entirely universal, as has been evidenced by good reports oh the part of many of our leading stores, and one or two industrial issues are expected shortly.''