THE INVESTMENT YEAR

New Zealand Herald, Volume LXXI, Issue 21991, 24 December 1934, Page 5

THE INVESTMENT YEAR

A RECORD TURNOVER ADVANCE IN INDUSTRIALS A MORE BUOYANT TONE An improvement in values for leading New Zealand industrial shares was the most marked feature of operations on the Auckland Stock Exchange during the past year. The previous year saw an exceptional advance in giltedged and near gilt-edged stocks, indicating a flow of capital through "safe" channels. This movement persists, but it was accompanied during the past year by an extension of dealing in other directions. By this means investors revealed the confidence felt in conditions generally. "There was an increase in business for the year and we believe that the turnover was a record,", said Mr. G. C. Creagh, chairman of the Exchange, when the market closed on Friday. "Generally speaking, there was a more buoyant tone in the market and a further improvement is hoped for in 1935. However, too much optimism is unwise while conditions in the primary produce markets remain so uncertain." All Government loans rose over the year and the record price touched was £ll3 10s for the 1955 4 per cent stock early in November. Actually, prices advanced steadily until a few months ago, when it was brought home to investors that the State had the option of redeeming the issues within three years of the maturity date. This caused a readjustment of values, affecting chiefly the short-term issues. The 1940 4 per cents dropped from £IOB to £lO5 in a few weeks. The tendency since has been downward, yith a slight recovery to about £lO3 10s last week. Loans and Debentures It can be understood that Government loans, bein<z readily realisable, have been used as a depository for surplus cash by trading concerns, which are working with smaller stocks, and by tho banks, whoso advances to customers have been reduced. The rise in prices for loans indicates unfavourable conditions in trade and, in the ordinary course, a steady fall should point to tho greater use of funds in business. Falling interest rates have also helped Government loans and body debentures to higher levels. In debentures, the earlier redemption point again appears and it may be expected that, where the optional clause exists, the loans will not move to a very high premium. The rise in Government loans since the conversion operation in April, 1933, is shown in the following table: — April, Dec., Dec., 1933 1933 1934 Bonds, 15/1/40. 4 .. 992 102 103* Ditto, 15/2/46, 4 .. 99J 101{ 105f Stock. 15/3/38-43. 3i .. 991 101 105 i Ditto, 15/5/39-52, 3i .. 99 101 106 Ditto. 15/4/49. 4 .. 99* 101 107 Ditto. 15/6/55. 4 .. 995 102 109 i Bank Levels Disappointing As an investment where capital appreciation is looked for, bank shares have been disappointing. With the single exception of Bank of New Zealands, market values to-day are lower than at the end of 1933. The only increase in dividends was in Bank of Australasias, from 7 per cent to 7£ per cent. Investors must now have accepted the fact that bank shares will not bo the first to reflect an improvement in business conditions. The banks are still finding it difficult to employ their funds profitably and the total of deposits to advances is dispropmrtionatelj large. A new issue, Reserve Banks, appeared during the year and the shares moved immediately to a premium, the market price now being £6 lis 9d, compared with £6 6s in August. Levels for bank shares compare as follows: — Dec.. Dec., Dec., 1932 1933 1934 £sd£s d £ B d Bank A'asia. 950 12 63 11 00 Commercial 0 13 7 0 17 7 0 16 4 Nat. N.Z. ..370 410 812 6 N.S. Wales .. 26 15 0 32 7 6 31 5 0 New Zealand .209 279 28 10 Union ..700 9 14 0 8186 Strong Insurance Market Insurance shares have shown greater sustained strength than any other group in the investment market. This is due to the fact that high dividends have been maintained, while one company declared a bonus dividend and another made a bonus issue of shares. The companies have fully demonstrated their ability to make substantial profits even in depression years, consequently the shares are regarded as a "safe" investment or as an opportunity for capital gains. The actual return on the shares ranges from about 2J per cent to 3J per cent. A comparison of values is as follows: Dec., Dec., Dec., 1932 1933 1934 £sd£s d £ s d National ..0 14 0 0 18 6 116 New Zealand 2 09 217 0 389 South British . 2 14 0 3 17 0 4 16 6 Demand lor Industrials The improvement in New Zealand industrials during tho year is a direct reflection of brighter conditions in trade. Some firms, such as Farmers' Trading, National Timber ancf Bartholomew Timber, returned to the dividend-pay-ing list, and increased dividends have. been paid by Bycrofts, Westport Coal, Wilsons Cement and Milne and Choyce. A factor contributing to the better tone was the capital reconstructions carried out by some concerns. A comparison of levels for a selection of New Zealand industrials is made in the following table: — Dec., Dec., Dec., 1932 1933 1934 £sd£s d £ s d Pukemiro Coal 130 120 150 Auckland Gas 110 140 163 N.Z. Breweries 1 4 6 117 3 211 0 Bycroft .. 110 0 216 211 0 Farmers' Trad. 029 038 070 Gear Meat . 1 7 3* 113 0* 1 6 0 Milne <fc Choyce (deb.) .. 013 0 017 9 019 0 Wilsons Cement 18 9* 166 112 0 *£l paid, now 10s. The Australian Issues A rise in Australian industrials preceded that of the Dominion issues, but there was a further advance during the year. Higher dividends have been paid in many cases, such as GoldsbroughMorts, Tooth's Brewery, Australian Glass and Kauri Timbers. In addition, the Australian market received' a distinct fillip toward the end of the year, when a crop of bonus share issues eventuated. These distributions were hastened as the result of the new Federal income tax law taking effect from December 31. The initiative was taken by the Colonial Sugar Company, which retains foremost position in the industrials market. Sugar shares were done this year up to £BO, an appreciation of 25 per cent, and they are now priced at £42 10s, based on a dividend of 6J per cent, as compared with 12$■ per cent. The return, which is under 3 per cent, is probably the lowest yet recorded. A comparison of values for Australian industrials is as follows: Dec.. Dec., Dec., 1932 1933 1934 .tsd£ed£Bd Goldsbroueh-Mort 1151 14 61 10 0 Kauri Timber .. 0960 15 70 18 9 Tooth'e Brewery 111 02202 11 0 Ana. Glass . 1 17 9276 3 00 British Tobacco 1 7 6 1 17 5 2 0 10 Colonial Sugar .. 45 16 363 10 042 10 Ot Broken Hill Prop. 0 17 62032 14 0 tAfter bonus distribution. A review of movements in the classified sections of the market reveals the outstanding gain made in timber shares, due to improved conditions generally in the industry and to the Government subsidy on building. The National and Bartholomew companies were a tile to pay dividends and the Kauri Company increased its rate. Nationals are

now priced more than twice as high as in December, 1933, and rises have been shown in all other issues. Loan and agency shares showed improvement early in the .year, following the rise in wool. However, the market for those issues is now rather lifeless, due to lower prices for thg staple. Interest in coal shares revived at the end of the year as the result of negotiations between the Waikato companies. Sharp rises occurred in levels, which offset the steady downward trend during most of 1934, which was a disappointing one to the investor in coal shares. Over the year, Pukemiros rose from 23s to 255, Taupiris from 15s 6d to 17s 6d and Renowns from 2s to ss. Levels for gas shares showed a moderate advance and shipping shares also appreciated during the year. New Zealand Breweries had strong support, causing a rise in the market price from 37s 3d to 51s.

THE MINING MARKET A DISCOURAGING YEAR WAIHIS MORE UPWARD From an investor's point of view the mining industry during 1934 provided more disappointment and discouragement than dividends on his capital. With improved machinery for goldwinning and a high price for gold the mining market might be one of the strongest sections of the Stock Exchange. However, except for Waihis and other leading issues, the demand is weak and hesitating. Many new issues were added to the official list during tho year, chiefly the shares of South Island companies. Sharebrokers are not optimistic of the chances of some ventures and Mr. Hnrman Reeves, chairman of Ijhe Dunedin Stock Exchange, said recently that he believed a large number would not be in existence in the near future. It is claimed that South Island ventures are mainly responsible for the unfavourable tone in the market and that investors observe the frequency with which explanations for loss of time and money have to be made to shareholders. It is pointed out further that the fields in the North Island have suffered, as the result of capital flowing into South Island ventures.

Perhaps the most disappointing field in the South Island is Cromwell Flat, which so far has not lived up to earlier expectations. In December, 1933, BellHoopers were done at 10id and BellKilgours at Is 2d. The last sale in BellKilgours was at 2d and in Bell-Hoopers at sd.

A few of the new companies are making progress and modest but encouraging dividends have been paid. In such a class are Matakis and Worksop Extended, the directors of the last-named company being able to set aside a fund for repayment of capital when the ground is exhausted. Among the older-established companies, Waihis retain the leading position and these shares have shown most appreciation during the year. Waihi Junctions advanced to a smaller extent and Blackwaters, which have been rather quiet, were done recently at 32s 6d, a gain of os over the year. Following is a comparison of values for leading issues: Dec., Dpc., Dec., 1932 1933 1334 i?s<3 jSsd £ e <1 Blackwater ..116 176 112 6 King Solomon ..02 4 032 0 3 9 Mount Lyell .. 018 4 1 3 3 017 7 Okarito .-0 86 03 0 0 8 9 Waihi . . 019 0 110 2 117 9 "Waihi Junction 033 047 04 10

In the market for Australian issues Mount Lvells have dropped owing to production difficulties, but Mount Morgans and Broken Hills show substantial gains. Further afield, Bulolos have become established on a sound dividendpaying basis.