"STAG" OPERATIONS

Evening Post, Volume CXIX, Issue 32, 7 February 1935, Page 4

"STAG" OPERATIONS

AUSTRALIAN LOAN

A LITTLE TOO FINE"

■%s reported by cablegram' from London recently "stag" operations are said-to be largely to blame."for. the under-subscrip-tion' of the Commonwealth conversion loan of £22)381,000 in' London. Commenting on the report, the "Sydney Morning; Herajd" says that "stags" are speculators' who apply for large allotments in new issues, hoping to selltheh- holdings almost immediately at a premium. If there are indications that the issue is not being taken up readily by investors, the "stags" withdraw their applications before allotment date, and thus confuse and embarrass the borrowing authorities.- " :. ■

According to the cables and to a stated ment by the Australian Prime Minister (Mr. Lyons), this is what occurred inithe Commonwealth conversion. The cashslist' was open'only one day, and ■■encouraging applications were received, but the speculative applicants subsequently became nervous and withdrew^:Their ranks, apparently, were swollen by "stags," who had applied fory allotments in a '£10,000,000 loan, floated by the London County Council.and who forsook thistissue; when it began to appear that it ■•would;; no* reach a premium. The genuine cash in the Commonwealth -loan 'will receive full allocations, instead of being rationed as in several previous conversions. 4 Apparently London custom in floating such loans precludes measures which would drive the "stags?' out of the marketi Trustees and others wishing to convert must be given reasonable time, and.the practice is to allow of the withdrawal of Cash applications, up till the <tey'-:6n iwhich tin allotment notices:\are'. posted!-11^ consequence, speculators' Always have "several: days in. which; to gauge the Jfeeling'of the market and decide whether to. let'thenstag' applications stand or cancel them. Apart from the effects of' such speculation, there is a feeling that the rate on the conversion loan may have been cut a little too fine for the English investor; Since the conversion of July, 1933, on which the effective yield was £4 Is lOd per cent., the yields on Australian, converted loans-in Xbndon have,fallen ini'successive lasuesyto -£3 17s>lld,!-' £3 16s. Bd.;'£3M3s 6d, and £3 6s, the yield on the issue of last November. The latest loan bore a Hat rate of £3 5s per cent., and was issued at .par. The: opinion was expressed ni, financial, circles;that issue: at.a small discount "would'lave attracted many-more investors. ■••■■■■

!'-V LONDON, .February; 5. ■ : Jn, the.iHouse,.of ; Commons Mr. Neville Chamberlain, in .reply;to Sir C..S. Cobb IW. said he had no knowledge, other than what he had seen in the Press, relating to the "stagging" of the recent Australian conversion. He understood that the genera] question of "stags" activities .is being, considered by the authorities, but that no Government action was called for at present. ' ■ . ■■