THE New Zealand Herald AND DAILY SOUTHERN CROSS. THURSDAY, APRIL 27, 1922. BRITISH INVESTMENTS.

New Zealand Herald, Volume LIX, Issue 18075, 27 April 1922, Page 6

THE New Zealand Herald AND DAILY SOUTHERN CROSS. THURSDAY, APRIL 27, 1922. BRITISH INVESTMENTS.

The over-subscription of the New Zealand loan at the lowest rates offered by an overseas borrower since the war rounds off the success of this highly satisfactory trans- , action. Last year 58 per cent, of the : Dominion's loan was left with the underwriters. Such a suggestion of disfavour hurts the national pride in ; the country's good credit, and the wound was not salved by the explanation that the apparent neglect was due to temporary conditions that did not prevent the scrip rising immediately to a premium in the ; open market. On this occasion the list was filled long before the closing date, and there can be no question of the Dominion's standing in the ■ London market. The reception of i the loan reflects the eagerness with ! which British investors have been I buying first-class securities for I several months, while the offer, and j the subscribers' acceptance, of a bare 5 per oent. yield has been justified by the terms of the British Government's latest funding proi posal. There has been an extraI ordinary boom in all investment I securities dating from the clearing of the British political outlook and the reduction in the bank rate in the third week of February. " A flood of buying orders descended upon the Stock Exchange," a specialist correspondent wrote recently. " There was no stock. There was a wild eagerness to invest. The congestion in the uarket itself has recalled the days of previous booms in markets concerned with speculation and gambling. Heat, dust, crowds have been the portion of the Consol market day by day. To get from one part of the House to another involved a struggle."

This situation has arisen immediI ately from the shortage of stock. I Prices had fallen to levels at which holders who had to sell or were afraid to hold were out of the market, having sold tcr purchasers who bought without any intention of selling. The result was an accumulation of money on deposit, and whenever the situation cleared the buying pressure forced up prices of the popular stocks and absorbed new issues of equivalent standing. In other circumstances, had trade been active, much of the capital would have flowed into commerce. But at present British industries are not encouraged to undertake the expansion of business that would enable them to use new capital. Anotner factor that has contracted the field for British investment waa mentioned in a telegram from Wellington last week—the financial degeneration of European countries whose securities competed successfully before the war with the best Imperial stocks. Even had investors forgotten the consternation that wag created by the war's devastating effect upon investments in enemy countries, the present state of Europe would not recommend Continental issues. Of the countries engaged in the war, Britain alone is endeavouring to discharge her debt obligations in full, and in those countries where Governments are pleading poverty, private enterprises will appeal in vain to British investors unless they offer frankly speculative terms. This restrictive influence may, indeed, be the strongest element in the financial situation, and though its force will no doubt diminish as the reconstruction of Europe proceeds and peace becomes established, the tendency of British capital for many years will probably be toward the realisation of the policy of concentrating British resources upon the development of the Empire. Proposals have been made that the Parliaments of the Empire, proceeding on the analogy of trade reciprocity, should encourage by preferential taxation the reservation of British investments within the Empire. It appears that post-war conditions are likely to accomplish all and more than the advocates of this principle thought possible,

This is not the only development that has disturbed the equilibrium of international finance. Of comparable importance is the change in the situation of the United States from a debtor to a creditor nation. America is unable to balance her international accounts because she has not yet adjusted her commercial policy to her new position. According to American economists, there is a balance of interest due to the united States from foreign investments, apart from the interest on the , debts of the Allied Governments.

Yet she is siill pursuing her traditional policy of expanding exports of goods and striving to maintain the mercantile marine which already earns more from foreigners than the country owes them for shipping services. Already there is a heavy balance, and unless the United States is prepared to sacrifice her foreign markets, she will be constrained to follow the example of Britain and seek sound investments in foreign countries as well as finding foreign markets for her goods. And since the American buyer of foreign securities has had less experience, and has less knowledge, than the British investor, ho will probably be even more cautious in his attitude to foreign flotations in New York. There are already welldefined channels for American capital to flow into the South American Republics, but other outlets will be required to absorb tho annual surplus, which runs into hundreds of millions of dollars. It is not surprising that American financiers should have already turned their attention to the British Dominions, whose latent resources are a complete guarantee of their ability to pay their obligations in full. A New York banker recently obseryed that America will not have ! matters all her own way in world- J finance because of the severe com- i petition ahead from London. The corollary holds good also. American competition will be a more i important element in the London | money market than it was formerly, j and the feelings expressed by British j financiers when Queensland raised a j loan in New York were instinctive i of future possibilities. M>. Massey j has laid down the policy that New j Zealand will give her business to London as in the past, and other Dominion statesmen have expressed similar views. But Imperial preference in finance, as in trade, implies reciprocal concessions, and British investors must recognise that if the overseas Dominions are to resist tho attractions of American dollars they must have access to the British investment funds on equally reasonable terms.