COMMERCIAL

Evening Star, Issue 12365, 1 December 1904, Page 5

COMMERCIAL

In commenting on the success of the flotation of a recent Cape Town municipal loan, an English paper says that there is great difficulty in arriving at a standard of value for cdlonial municipal securities. At Homo the yield upon Corporation loans varies hut very little, and where there is a market? exception it is due to special circumstances, such as the socialistic or overtrading propensities of particular local bodies, which justify a certain amount of discrimination in the treatment of their loans. The local circumstances of the communities situated in distant parts of the Empire cannot be so closely investigated, and the comparative security offered in’ Ihem for money borrowed in the Homo market can only he judged 6n general principles, assisted by such information regarding local circumstances as can be gathered from the prospectuses of the loans and other sources. From a list of colonial municipal loans, in which rate of interest, amount, date o! redemption, price, and the yield per rent, on the price are given, it appears that the return ranges from slightly over 31 per cent, to but littlo leaa than 5 per cent. “The biggest return from the, stocks quoted,” continues the paper, “is to be secured from the loans issuer! many years igo by municipalities in New Zealand. The comparatively low price at which these ••land is due to the recklessness with which kurte amounts of money were borrowed Ijy

towns with small populations, which ought to have been dependent upon their own resources for lighting, paving, drainage, water supply, and other demands. High rates of interest were offered, and a consequence of the extensive borrowing’ is that quite a disproportionate share of the .space devoted to colonial and foreign Corporation stocks in the Stock Exchange official list is occupied by issues of New Zealand municipal and harbor bonds. These authorities, it may be said, have not attempted to raise money here for k number of years now. The old loans, if issued by small communities, are also small in. amount, and in many cases aro being steadily reduced by the operation of sinking funds. A drawback is that, owing to their limited amounts, the bonds when once purchased are not readily marketable." Next)' to New Zealand, South African Corpovatito loans give tho highest ivturn. The loans of Melbourne and Sydney give a smaller return than those of South African municipalities, though the resources of the former have undergone but little expansion or development in recent years. A noteworthy fact in this connection is that the capital cities of Queensland, South Australia, and Western Australia have hitherto abstained from borrowing in the London market. Canadian municipal loans give a smaller return still than Australian.