UNDERLYING FACTORS OF CURRENT TRENDS EXAMINED

Otago Daily Times, Issue 26958, 18 December 1948, Page 3

UNDERLYING FACTORS OF CURRENT TRENDS EXAMINED

INVESTMENT MARKET

By Gregory

With only a broken period remaining before the vacation, the Stock Exchange year drew, towards its close when the final full week of trading ended yesterday. In contrast to the preceding December, the year will end with share values anomalous to commodity prices, and more than one operator inclined to the probability that just as last February witnessed the divorce, by mistrust, from high pre-Christmas values, this February might well witness a raising of current values tq conform more closely to the long range outlook—international affairs excepted.

Wool at 31d is not “ recession.” It might be “ bad medicine ” and has been called some-such by the Leader of the Opposition; it is certainly artificial and can encourage a false sense of values, but if banknote prosperity is the measure of the country’s ambition one will be able confidently to express the wish, seasonal two weeks hence, “And a Prosperous New Year.” New Zealand is essentially a primary producing country, and if the impact of Labour politics has tended to obscure this basic fact, the investment portfolio of an astute or commonsense investor should still proclaim it. The years 1947-48 will in all probability be recorded in investment history as the era of mushroom millions, and how they will look when any such history is written is possibly better not contemplated.

In 1938 there was (we had written the plural were) one industrial public company trading exclusively in New Zealand capitalised at £1,000,000 or over. To-day there are seven, involving a subscribed capital of £13,000,000, and with only two exceptions they are erected on a floating foundation—their sole prop and justification the import and exchange control of the Government of the day and its determination to turn a primary producing country into a hedgehog of chimney stacks. One does not make mouse traps on a fasrm nor breed weaners in a foundry, but the political game is no respecter of a nation’s heritage and the investor should tread lightly in the mighty industrial edifices erected behind the flimsy barrier of political selfishness. Those industrial shares listed on the Stock Exchange which were reared and brought to full maturity as adjuncts to a primary producing economy and withstood the buffeting of free trade and overseas competition down the years are still to-day the safest depository for investment capital, and despite the apparent immediate gain acruing to shareholders from new issues this column would further narrow the selection to a

orefererfce for those companies which have had no need to call on shareholders for new capital at State-determined premiums to finance plant replacements or to expand their business to capture some of the will-o-the-wisp inflationary For shareholders, as for investors, the year was in sharp contrast to the tranquility of the preceding four years. First came the market break In February which lowered prices and dulled trading well into July only to be succeeded by the resumption of parity with sterling, out of step with Australia, in August. After a month of hedging, local investors decided on a 10 per cent, disparity with the Australian values of the cross-Tasman scrip so largely held in New Zealand, and as the year ends that margin is fully maintained. Guessing at when Mr Chifley will move closer to sterling is on the wane, but the Christchurch wool sale and its record 81d which gives the New Zealand grower more than he ever got with the exchange rate in his favour, will probably prove more significant in Canberra than the 152 d currently being paid for Australian fine wools. Three new members joined the local Stock Exchange during the current year, and this trend in domestic affairs is stgnificant in that it measures the acceleration of public interest in Stock Exchange investments which has provided the opportunity and impetus for the largest increase in membership achieved in the past 15 to 20 years. , ... The Stock Exchange year will close with an afternoon call over on Wednesday next and “ Gregory ” therefore takes this opportunity of wishing his readers a very happy Christmas, a contented and prosperous New Year,