GUARDING THE MARKET

New Zealand Herald, Volume LXXIII, Issue 22578, 17 November 1936, Page 8

GUARDING THE MARKET

It has been announced that the United States Treasury and the Federal Reserve Board are considering precautions to prevent a wholesale withdrawal of foreign investments at present held in the United States. The idea evidently is that if a repatriation of this capital is begun simultaneously by large numbers of investors, it may threaten exchange stability and have an unfortunate effect on the stock market. As the statement 'says, the agreement between the United States, Britain and France on conditional stabilisation of exchange should make its safeguarding reasonably easy, but it is suggested that the danger to the stock market would remain. These possibilities were discussed in the last circular of the National City Bank of New York. There it was recognised that with devaluation an accomplished fact there might be a desire to repatriate funds which had been invested in the United States, but that other circumstances would alfect the position. European unrest and uncertainty of domestic outlook in the investing countries were advanced as influences against the impulse io withdraw investments, I while the improved American situation was suggested as an inducement to remain, in search of profit. An j official return showing the position i at the end of 1935 was quoted,' giving the combined holdings of French, Swiss and Netherlands! investors in long term securities as j 1,465,000,000 dollars. The total, it: was estimated, had been substan-, tially increased during the present year, and bank deposits and other short term funds must be added to it. With it all, the opinion was expressed that the rate of withdrawal should such a movement begin, j would not be great enough to disturb the market seriously. The raone-! tary position was strong, and the! market active enough to absorb j likely offerings by foreign investors without difficulty. The official action, therefore, is probably a precaution against fairly remote possibilities.