SHARE PRICES RISING.

New Zealand Herald, Volume LVI, Issue 17275, 26 September 1919, Page 5

SHARE PRICES RISING.

SPECULATIVE BUYING.

ALMOST A " BOOM."

DANGER OF A REACTION.

As was recently pointed out in the leading columns of the New Zealand Hehai.», the rear 1919 is likely to prove the Dominion's "boom" year. The values of all our principal exports are exceptionally high, and the country is exporting, in addition to its normal production, vast quantities of produce that have accumulated in its stores owing to shortage of shipping during the year.

The exports for the first seven months of 1919 have amounted to the record figure of £32,683,222, this sum being only half-a-million pounds less than the exports for the whole of 1916, in which year New Zealand established its record for exports with a value of £33,281.057. As is natural, these record exports have resulted in an unparalleled prosperity and a corresponding increase in the Dominion's wealth, with the consequence of most marked results on our Stock Exchange. Comparative Prices of Stocks. Immediately war was declared, in August. 1914, there was a heavy fall in the majority of stocks on the local Exchange. But confidence was soon restored, and values in most concerns again rose. It is interesting to glance at the table which follows, showing the prices of our principal stocks just prior to the war, m the middle of the war period, and to-day. The figures given in this table reveal many phenomenal and startling rises, but it is only fair to state that the list includes many very progressive concerns which were making steady advances prior to the war, and which would have very greatly improved their position to-day had New Zealand merely enjoyed normal prosperity. But, granting all this, the conclusion will be forced upon prudent minds that values are now on such a high basis that any further advances are likely to be viewed with alarm. The/ table referred to is : — Present Sep!., July, prices. 1917. 1914. £ *. d. £ s d. £' s d. Banks— N.Z. . . 14 18 0 12 0 0 10 10 0 N.Z. (f.r>.). . 19 0 0 17 10 0 16 15 0 National .. 690 520 5 50 Insurances— National . . 450 3 00 210 0 N.Z. . . (a) 17 8 4 716 0 517 6 S'th British 990 515 0 476 Standard . . 10 200 115 0 Financial JC.Z. Loan and Merc. 115 0 0 80 0 0 92 10 0 N.Z. and Hiver PI. 2 3 6 1 18 0 2 0 0 Gas— Auck'd (d.u.) 166 176 190 Shipping HuddartParker 269 114 0 10 0 Northern Steam (r>.u.) 017 6 015 0 015 v, P. & O. (defer'd stock 595 0 0 328 0 0 (b) Union Steam Ship (ord.) (c) 3 0 0 14 0 TimberKauri fp.u.l 114 0 150 200 Kauri (oon.) 015 6 010 6 019 0 LO B .. 186 160 100 Wool — Kaiapoi (ord.) 8 5 6 615 0 5 5 0 Mossriel 5 16 0 4150 3 13 6 Sucar—

Co'onial (Anrt) 26 0 0 23 0 0 id) Colonial (N.Z. and Fiji) . 20 15 0 22 0 0 (A) M'nins— Waihi. . . 283 116 6 116 6 W»\hi Orand Junction. . 014 9 015 6 156 Talisman .0116 0 10 6 1 12 0 (a.) Price given is equivalent to old issue value hased on present price of £1 14b lOd. * (b) Not quoted in 1914. (c) Now mostly absorbed in the P. and O. shares; few still held not quoted. (d) Issues not divided in 1914, when price for old shares was £50.

Analysis of Increased Values. It will be seen from the above figures that, comparing the present with pre-war prices. Bank of New Zealand have increased by £4 Bs, and fnilv-paid issue by £2 ss; National Banks by"£l 4s; National Insurance by £1 15s: New Zealand Insurances (reckoned on the old issue rate) by £11 10a lOd : South British by £5 Is 6d ; Standards by £1 6s ; and Loan" and Mercantile? by £22 10s. With regard to the increase in National Banks, Loan and Mercantiles and River Plates, English income tax—a very serious item —has to be deducted from the dividends, and for that reason the prices of these stocks are lower than they would have been. In shipping P. and 0.'.~. which stood at £328 two years ago, to-day show an increase of £267, and Huddart Parkers have risen £1 6s 9d since the pre - war period. It i„ a sign of the times that the shares in an old-estab-lished 'local concern like the Auckland Gas Company are slightly lower now than before the war. Woollens have appreciated in value, the price for Kaiapois ford.) in 1914 being £5 ss, as against £8 5s 6d to-day, an increase of £3 0s 6d. Lesser Rates of Interest Accepted. The figures tabulated make it clear that the greatest enhancement in values has taken place in insurance shares. The present market price of some of these shows a fairly substantial margin over announced assets. This simply means that a proportion of the market price is for goodwill. As showing that speculative buying is being done at present New Zealand war bonds, a safe investment, are very .auch neglected, the public being content to take p. lesser rate of interest and purchase insurance and bank shares in preference. Possibly one reason for this is that as each new loan comes cm' industrial concerns requiring the capit-- for their own business are forced to sell their old loan stock at a discount in order to take up new <#tock under the compulsory clauses of the Act. This is causing investors to neglect war loans to some extent. Government bonds and war bonds are returning 4£ to 5 per cent, interest. As compared with these rates the returns from insurances and banks are, on the present market prices:— Market Present Price. Return Per cent. £ a. A. £ a. d. Insurances — National ..450 3 10 7 New Zealand . . 1 14 10 2 17 5 South British ..990 2 12 10 Standard ..310 368 Banks New Zealand .. 14 18 0 3 7 1J N.Z. (f.p) . . 19 0 0 5 5 11 National ..690 509 Buyers Attracted to Insurance Shares. Taking it all round the enhanced prices of shares are largely due to the enormous amount moneyavailable in New Zealand for investment. The British Government alone expended a little over £100 000,000 here in the war period for produce, etc. Much of this has been paid for before delivery, so that the shipping shortage did not keep producers out of thew money. On the other hand, it prevented importine to a verv large extent, which was ■•: good thing in the sense that it kept a great deal of money in the Dominion. In this connection it is worth noting that the trade balance of exports over imports for New Zealand for the years 1914 to 1918 inclusive was £35,376.536. and for the first seven months of the present vear £15.120,904, a total of £50,497,440.

With all this accumulation of wealth, there have been no additional outlets for investment created, consequently the demand for available investment has grown. As regards the peculiar attraction which insurance shares undoubtedly have for speculative investors, the public, for one thing, are always expecting the capital value of the companies to go higher, and the lesser interest returns content them in the meantime. In the last four or five 'years that anticipation has been justified. Another factor which attracts buyers to insurance shares is that most of the companies can very nearly pay their current dividends out of the returns on their ini vestments. Thus, they are able to capitalUse nearly, the whole of their earnings. Most of the companies, moreover, are periodically making transfers from reserve to capital account thus reducing, of course, the liability of 'he shareholders.