PRICE MARGINS HAVE DISTURBING EFFECT

Otago Daily Times, Issue 27514, 7 October 1950, Page 3

PRICE MARGINS HAVE DISTURBING EFFECT

By Gregory

The share market could not escape the tenseness which surrounded the fate of the Australian pound during the week and there was a marked withdrawal of vendors as buyers of Commonwealth issues tightened their offers. Come what may, the contraction to 5 per cent, and less in the margin between Australian and New Zealand values is bad financing, and the fact that the legitimate investor who outnumbers the speculator by perhaps 95 to 5 should, willy-nilly, be committed to the need of Australian revaluation (to justify the prices he pays for Australian securities) is not to his credit.

The new issue cauldron was kept well-stirred with an announcement from Yarra Falls of a new issue of 1,000,000 £1 shares at par in the proportion of 1 for 1. The Electrolytic Zinc’s final dividend confirmed last year’s record rate (25 per cent, annual) and there were no exceptions during the week to the maintainence of the dividend rates operating a year ago.

Mount Morgan shares jumped Is 3d to 23s 3d overnight, and sprang another 9d on the day but this prerogative of mining shares was also emulated by Union Bank shares yesterday whjjph sold at £ll 12s 6d in the morning and were reported at £ll 10s 6d afternoon.

Any criticism of the 4 and 5 per cent, margins between 1 cross-Tasman values must necessarily be tempered by an appreciation of the otherwise restricted field available to investors. Not everyone can crowd into the limited range of first-rate Dominion investments, and then again, years of familiarity with such old friends as Mount Lyell, Goldsbrough Mort. Broken Hill Proprietary, ACI, Colonial Sugar and many others encourages close contact with them. But London, for instance, which has a long friendship, too with these issues values them precisely in terms of their home values adjusted in terms of the rate of exchange operating and not the rate expected or hoped to operate. As for what may be expected or hoped for one can only take cognisance of the welter of opinion which has already been expressed and from a selection of it form one's own views. The economist has a far wider area from which to draw his theories than, say, the banker or financier, who have to put these theories into practical application but over and above all three stands the politician, and the question of Australian revaluation is now undoubtedly a P °The Ca iCI SU i e ssue of 1,006,505 ordinary shares mentioned here last week win bring issued capital (both ordinary and preference) of this huge industrialist to £lO 000,000, besides which the company is currently issuing £3,000,000 in 4 per

and a world which, with diminishing conviction, avers “ there is nothing newunder the sun ” can chiefly thank ICI of England. Du Pont of America, and I. G. Farben of Germany for its incredulity. The new money is required to extend the alkali plant in South Australia, the chemical plant in New South Wales, a factory in Victoria producing leather cloth, plastic materials and rubber cloth, and a factory also in Victoria producing ammunition. The new shares will not be fully called up until April, 1952, but to the extent they are paid up they will participate in profits earned from now on, but this proviso nevertheless excludes any dividend paid next March, which would be from profits earned before September 30 last. Prospectuses are in the city or can be secured (they are printed on air mail paper) and the underwriters point out that only applications lodged with the full application money (5s plus the whole premium of 2s 6d per share) will be considered

At first appearance it seemed that the cablegram in Wednesday’s paper correctly ascribing a " huge profit ” to Mount Morgan was the*spark which revived the market for that share on the previous day and sustained it through Wednesday. The details of the profit mentioned in the cablegram, however, had already been released and published in August, and were therefore only a recapitulation with the publication of the annual report. The first intimation of the company s intention to investigate the establishment of a nitrogenous fertiliser works in Queensland came ,out in the same cablegram, however, and in itself would justify a reassessment of the share from its dismal level on the previous day when sellers were offering at 225. We have previously said that Mount Morgan was taken’out of the short-term category and elevated to long-term interest with the decision a few months ago to open up the Sugar-loaf area, and the new prospects of entering into industry now accentuate that trend. Any such development will, of course, extend well into the future, and the speculator might well ask himself if he is not going to be by-passed bv seeing profits diverted to, capital expenditure. Pending further information the share stands as an exacting barometer of public opinion on the question of Australian revaluation and without offering the prospects of great profits from present near-record levels could involve sharp losses. The rise in Donaghy’s Rope shares during the past two weeks continued to exercise the minds of brokers, and not unexpectedly caused the most frequently broken of the unspoken rules to be again broken Perhaps anxiety to get the best possible .price for a parcel he had for sale or perhaps pique at not being able to identify the sudden interest caused one broker to ask, “ What the deuce put Donaghy’s Rope shares up?” There was a slow but then hearty response when a voice replidu, “ Haven’t you been following the newspaper reports of the progress of the Royal Commission on Capital Punishment? ”

cent, debentures repayable in 15 to 20 years. ICI is a comparative newcomer amongst the mammoth industries, but its trade is as old as that of the apothecary and as modern as that on an atom cleaver. Formed in 1928, just two years after the parent English company. Imperial Chemical Industries of Australia and New Zealand has rocketed to industrial prominenbe and never a year goes bv that does not witness the expansion of its activities and therefore its investment prospects. Chemicals, plastics and explosives, and allied products are mentioned in the prospectus, but it is the “ allied products which best convey the magnitude of the companv’s interest. Its chemicals are widely used as raw materials for other manufacturers. Paints, plastics, soap, dves, safety matches, paper and glass all contain basic materials produced by ICI