NEW ZEALAND LOAN

Evening Post, Volume CXIII, Issue 118, 20 May 1932, Page 8

NEW ZEALAND LOAN

•SATISFACTORY RESULT

LONDON PRESS COMMENT

(From "The Post's" Representative.) LONDON, 7th April.

"Considering the price, and the financial position" of the country, the result of the Now Zealand loan is very satisfactory." This is the opinion of a partner of the firm of brokers which handled the £5,000,000 loan in 5 per cent, stock, which was offered at £08J per cent, on Monday. The price was undoubtedly a high one for the present time, but it was evidently arranged so that it would not attract speculators. It was considered that if genuine investors took up £3,000,000 on the day'of issue, leaving the remainder with the underwriters, there would bo no grounds' for complaint. As it happens, the speculators have refrained very largely from buying, and the underwriters have beeii left with 47 per cent, of the issue. This means that £2,650,Ct*t) of tho stock has been takon up by' the public, leaving £2,350,000 with '*he' underwriters. The stock was offered on Exchange yesterday at i per cent, discount, .:.-.. It will thus be seen that the first allocation fell short of expectations, by £350,000. The brokers' point .of .view is rather different from that of a patriotic New Zealander. He maintains that unless you leave 50 per cent., with tho underwriters it is not worth the expense, of underwriting your loan. Fortyoight- hours is a very short period for investors to come along, especially when the price was made unattraetivie to speculators. The patriotic New Zealander might wish for over-subseripiion, but this would mean that those responr sible had set too low a price on the loan. ...-'. . . ..' . GENUINE INVESTMENT DEMAND. According to "The Times," "brokers reported that there was a good demand from, genuine investors for tho New Zealand loan, but that professional elements abstained owing to the-'weak-ne,ss of the markets in the morning. The result.of the loaa may, afford a trustworthy indication of. the strength of genuine investment demand, for the stock was not expected^ to appeal as strongly to'the 'stag' as recent issues of the trustee class." "The gilt-edged market," says the "Daily Telegraph,''' "revived too late to be of assistance to the New Zealand 5 per cent. loan. In the market it was considered that applications had exceeded 50 per cent, of the sum required. Though this compares unfavourably with recent issues, market conditions were adverse for a repetition of recent striking successes. These wero due in no small measure to the 'stag,' who applied many times in order to secure a small .'allotment. "The New Zealand result is not, discouraging, since it indicates that for high-class securities there is a large investing .public, arid given the right conditions full subscriptions are ensured.. While the New Zealand scrip may open at a. small discount to-day it is regarded as probable that the quotation will not stand long below the issue price." CREDIT DESERVEDLY HIGH. The' "Morning Post" has the following:— • ■ ■.- . ■ "It was rather unfortunate that at the moment of the opening of the.lists" on Monday morning all markets had become decidedly dull, even gilt-edged stocks and scrips of new issues :of capital reacting for a time. The effect of this has doubtless been to check the volume.of applications for. the Issue, so that-while there is reason to believo that the number of applications has been very considerable, the market yesterday was rather expecting that underwriters would be called upon to take up .possibly something under. 50 per -cent, of the issue. Even so, howeverj there is little doubt that any;stpck not taken for: the moment by tho public will be very quickly absorbed in the market, for while there is a full recognition of the vicissitudes through which. New Zealand asa country is passing, the credit of its Government stands deservedly high. Moreover, the- present issue does not by any means imply that £5,000,000 has been asked for as 'new' money, for £4,000#00 of the loan will be .used in funding Treasury bills maturing in June. 'The balance is required to finance a reduced programme, of capital works, and, according to a cablegram from ■ "Wellington; the Finance and Customs Minister, expressed the view that New Zealand should aim at an early cessation of overseas borrowing, adding, how'evor, what was reasonable, namely, that a sudden cessation on the top of the contraction in tho national income and the fall in prices would not be in the best interests of the country. v It must be remembered that quite apart from, tho economic .difficulties through which., so omany countries are passing at'tho present time, New Zealand "was quite recently the victim of an earthquake,' a catastrophe involving very large fresh outlays to repair the. damage done." CIRCUMSTANCES NOT PROPITIOUS Now . that,/the scrip has been on the market" for a day "The Times*':this morning makes further comment:— ' " Circumstances" were not propitious for securing a full public subscription of, the New Zealand Government's loan of of 5 per cent, xstock, offered at 98J, for since the prospectus wa3 published the market for,, trustee stocks has not been quite so firm, while other markets have been upset. by the Kreuger trouble and by Continental liquidation of various securities. Further, New Zealand securities cannot appeal to the investor in times like the present quite as strongly as they'would do in" more normal circumstances. Therefore the subscription- of 53 per cent, of the amount by investors, .leavr ing 47 per cent, to the underwriters, must be regarded as a satisfactory result. Yesterday the scrip opened at about -J discount, but improved to i discount by the close of business. The untaken part of the loan will; of course, gradually be absorbed by the .'investor."