DIFFICULT YEAR

Otago Daily Times, Issue 26957, 17 December 1948, Page 7

DIFFICULT YEAR

EXCHANGE ALTERATION ADVERSE EFFECT ON STOCK MARKET “ The year 1948 has been a difficult one for investors; the periodic reminders of Britain's economic plight, and the progressive deterioration in international relations have tended to undermine confidence in the future, the effects of which have made themselves evident from time to time in a general easing of the market,” said Mr W. S. Dawson, chairman of the Dunedin Stock Exchange, reviewing the work of the past year at the annual meeting yesterday. “ The announcement of practically no relaxation in taxation had a sobering effect, even though it was not unexpected this year, and the notification of a return to parity with sterling, without simultaneous action by Australia, was a blow from which some sections of the market have not yet fully recovered. Despite these adverse factors, the value of money has certainly not appreciated, and there is still a substantial amount awaitfing investment. These factors, combined with comparatively good reports from most companies, have been sufficient to keep prices at a reasonable level and prevent any sharp break in the general market, and any marked recession in a sound stock has invariably attracted surplus capital, thus effectually reversing the’ trend. Besides this, the share market still attracts attention from large companies seeking to purchase sound stocks showing a better return than that obtainable from some of their traditional sources of investment. In fact, it is known that some -complete new issues have been taken up by individual companies both here and in Australia. "A feature of the year has been the number of new issues by existing companies, some of which have found their present capital inadequate because of currency depreciation, with its attendant higher prices of merchandise held In stock, while others, faced with the necessity for extension of business premises, have found their trading banks debarred by Government regulation from advancing the funds required. Needless to say," he added, "Government lending institutions go merrily on their way unhampered by any such restrictions. Several Australian companies, many of whose shares are held In New Zealand, have also made new issues, but in only one Instance has permission been granted to remit the necessary funds to Australia.

Short-sighted Policy

“ This has debarred many holders from acquiring, at a reasonable price, further shares in sound, good dividend-paying concerns in spite of the fact that previous dividends have helped to augment, to no small extent, our badly-needed Australian funds. This short-sighted Government policy denies us the future advantage which would accrue from a substantial invisible export of this kind, which could conceivably prove invaluable in the future."

Mr Dawson said that the arbitrary alteration to the, exchange rate was of great importance to investors. It had been evident for some years that as world prices for New Zealand’s primary products increased in relation to the internal price level, • the main reason for the original Increase In. the rate has be£n gradually disappearing, and given freedom of movement instead of artificial pegging, a gradual re-adjustment would normally have taken place. The unexpected elimination of the full 25 per cent, at ope time without similar action by Australia had led to considerable disruption and loss In trade, and was the cause of great concern to Investors in Australian shares. “ The position of the rate of exchange between Australia and New Zealand Is now farcical in the extreme, and completely divorced from reality,” he said “ New Zealand’s adverse balance of trade with Australia Is of such proportions that the opposite of the present rate would be more in line with actuality." Office-bearers Re-eJected The following office-bearers were reelected: Chairman, Mr W. S. Dawson: executive—Messrs W. H. McLeod, C. Penman, R. F. Barr. J. R. Laidlaw, R. H. Reeves; trustees, Messrs Barr, McLeod, J W Smeaton; auditor. Mr Smeaton.