CITY MONEY MARKET.

New Zealand Herald, Volume LXV, Issue 19962, 2 June 1928, Page 12

CITY MONEY MARKET.

SURPLUS FOR INVESTMENT. FEW NEW ZEALANI.D AVENUES. GILT-EDGED SHARES SOUGHT, For months the Auckland money market has bep.n heavily loaded with free capital awaiting investment, and now that the proceeds of a splendid farming year and the surplus from an improved trade-bal-ance are adding their weight, the position has become such as to afford an interesting field for inquiry. Those who daily pulse the financial movements of the city and district—stockbrokers, solicitors, bankers and moneylenders—agree there is at present more money awaiting placement than has been the case for a long while. Their views on the causes and effects of the situation advance two salient facts—that investors are still demanding a far greater margin of security than a few ago, and that New Zealand affords only too few avenues of investment for its surplus wealth. " I have on my books now, awaiting investment on behalf of ten clients, £15,900, and most of it has been lying there for months," said a city solicitor, when discussing the position. While admitting that most of his clients were conservative investors, insisting upon gilt-edged security, be said it indicated the prevailing cautiousness in the money market to state that he had placed nothing for quite a long time. Most solicitors, he knew, were similarly placed. Free Money Banking Up.

Freo money was banking up on this tide of cautiousness, especially just now, when sums were filtering through after the good receipts from the year's trading in primary produce. There remained a reluctance to lend on rural security, although circulars from lending institutions, advising that they were prepared once again to consider more generally country propositions, appeared to indicate some return to the pre-slumj? standards. As for advances against city property, old and new, there appeared yet to be> some air of incertitude in assessing their value as security, although he was fully aware that most building projects were being comfortably financed. The same note was sounded by another legal office which was holding even more money on clients' behalf. "The average borrower is desirous of obtaining more than the cautious investor is prepared to lend," observed the member of the firm controlling its investment work. While there is now more readiness to lend on rural security, such transactions are effected only on the most careful valuations and liberal margins, with due regard paid to the true value of the land, and the ability of the occupier to farm it. Sales of adjacent properties are not now so much taken as a basis, and the days of fancy values are past. More Conservative Lending. "No longer can it be said that New Zealanders will lend on a less-conservative basis than most others within the Empire. They have learned their lesson." Most of his clients, he said, looked for- 6£ per cent., with a half margin; others held out stoutly for 7 per cent., but all -played very safe." • Appreciation in the value 01 many classes of shares on the Stock Exchange haa been one result of the banking up of free money. "Many solicitors who, formerly placed money in mortgages are now buying shares," said a stockbroker There had, in fact, been quite a liveliness on 'change" of late, and undoubtedly it was largely on account of the dearth of very sound investment in most other quarters. Of course, one normally expected an appreciation in shares at this me . the year, when capital emerged from the "wash-up" of the sale of primaiy pioduce, but in many cases where a true comparison was possible, shares were remarkably high. . An era of cheaper money with lower mortgage rates than the average of per cent, wats a possibility spoken of warily by financial experts. 'lhe statement of another member of the Stock Exchange gives the view of many. The Government, he said, was in the happy position of being able to pledge the security of the Dominion, and was lending so' much money at low rates as to make mortgage investment in New Zealand, generally speaking, less profitable than in Australia. Money Leaving New Zealand. That being the case, and since New Zealand afforded such a narrow field for general investment, far more attention was being paid to the Stock Exchange, through which, as well as through private transactions, there was a, steady flow of capital to the Commonwealth. So pronounced had investment :n shares of Australian enterprises through "the exchange become in, recent years that New Zealand now actually dominated some of them in point of share capital. It would be difficult to suggest how Dominion enterprise might be more fostered to absorb our liquid capital. Ho cited the case of a New Zealand mining concern which, searching about for a new field of endeavour, investigated gold-dredging and other enterprise's within the country, only to go eventually to Java to branch out there in a new direction. , ?? Attention Paid to Shares.

The probable reception which would be given a New Zealand State loan was discussed. "It. is all a question of terms," said a sharebroker. So many investors sought short-term investments, or such as they could quickly realise upon in time of business necessity. For short-term issues at 5£ per cent., he believed the Government could get all it wanted, but there was a reluctance -to "tie up" capital for longer periods. The recent Rural Advances issue of £400,000 had, apparently, been subscribed, but, so far as he knew, Auckland brokers had placed none of it, and there had been on the market' municipal loans of a more attractive character and probably there would soon be others.

"Gilt-edged shares have been eagerly sought for some time past," said another Stock Exchange member, when reviewing the overloaded money marketMore attention, he believed, was now being paid to "industrials," and quite apart from the disposal of so much surplus capital there was the circumstance that people had come to realise that Stock Exchange shares were not confined to risky mining ventures, but included many avenues of solid and profitable investment.

There was little variation in the views of others approached. All shared the conviction that in Auckland manv thousands of pounds were lying idle awaiting investment—much had gone into shares, no little to Australia, and other countries, and, while the mortcrauo market lagged, and there was a settled sense of caution, lenders were becinnino;, slowly it was true, but perceptibly. to look again with more favour on rural security. Most apparent was the lack of sound new New Zealand enterprises to tempt those with loose capital.