A £250 LIMIT

Evening Star, Issue 23100, 28 October 1938, Page 8

A £250 LIMIT

BANKS RESTRICT CAPITAL EXPORT “ FUNK " MONEY TO STAY AT HOME PRACTICAL EMBARGO ON AUSTRALIAN SHARES Since the return of the Labour Party to the Treasury benches financial circles have predicted that some action would have to be taken sooner or later to check the flow of capital from this Dominion for investment overseas. Such action has now been taken, not by the Government, but by trading banks themselves, in that they have restricted the amount of money that may be transferred overseas for investment purposes to £250. For direct trade purposes, though, no limit has been enforced. Large sums of money, when presented at tho banks for transmission overseas are subject to the closest scrutiny. It was freely stated by Government candidates ,during the election that there was no undue flight of capital from this Dominion, but from a reference to the Government Statistician’s returns, it appears very clear the position is not so financially sound as the public was led to believe. The continuous drop in London funds prior to the General Election still J continues, and this week’s Reserve Bank return shows a further drop in sterling exchange reserve of £804,754 to the low figure of £8,313.575. the lowest since the Reserve Bank took over the London funds. A further heavy drain on New Zealand finances recently has been the flow of capital for investment in Australia, and the banks have considered it necessary to call a halt. Instructions locally have come from the banks’ headquarters in Wellington, but whether they have received instructions or suggestions to apply the brake from the Reserve Bank itself cannot be confirmed, officials being very reticent in the matter. One aspect of tho embargo which must cause concern is that of the purchase of Australian company shares by Dominion investors. Under the terms of the. restriction, if an investor desires to purchase Australian securities of a value of more than £250, he must either forgo his financial transaction or purchase from a local seller. Also, the embargo will mean that should an Australian company make a new issue, New Zealand shareholders whose rights entitle them to a purchase of more than £250, cannot purchase beyond that limit, and will therefore be compelled to market any surplus rights in Australia. So far as New Zealand stock exchanges are concerned, the effect of • the embargo will mean that more attention will be paid to local issues. Investors, therefore, will be placed between the devil and) the deep sea, for they will have to face the prospect of increased taxation and consequent smaller dividend returns, or low interest rates from fixed deposits.