FALL IN SECURITIES

Taranaki Daily News, 7 October 1929, Page 16

FALL IN SECURITIES

EFFECT OF BANK RATE STOCK MARKET DULL. READJUSTMENT OF VALUES. (From Our Own Correspondent.) Wellington, Oct. 4. When money becomes dear, that is when one has* to pay more for credit. The first to be affected by the changed conditions arc what arc known as Stock Exchange securities, that is stocks and shares, bonds, debentures, etc. These securities are extremely sensitive, and move up or down in response to the movements in money rates and they aie very prompt to respond, On the London and New York Stock exchanges and the Bourses in Paris, Berlin'and other Continental cities all such securities are immediately marked down, and the movement extends to all other parts of the world, for there are many Stock Exchange securities that are international or inter-Empire .As an example, most of the banks in Australia and New Zealand have their shares quoted in London as well as in Australia and New Zealand, and when, owing to .the advances in money rales prices fall in Loudon there is at once a repercussion in the Dominions. During the past week or so shares —that is bank shares—hkve declined markedly. This does not mean that there is anything wrong with the banks. On the contrary one can make certain they will pay the usual dividend, and that their profits will be as large as in the past year, or perhaps larger, because they will now be able to employ all the funds they may have available at a profitable rate of interest. What is happening is that investors in shares now want a °bigger return, and those who hold the shares find that if they wish to sell them they must accept less than was the case a week or two ago. Market views have changed with the change in the bank rate, lhe diop in the value of. shares is not to be regretted, because they were carried too high through' investors competing against themselves and the return or income from the shares lias been absurdly small. Of course,' business on the Stock Exchange will be dull, and the dulness vv ill be most accentuated in those centres were dealings have been most active, ■for it is a singular phenomenon that investors who show considerable speculative courage when business is brisk become as timid as mice when there is the least prospect of dullness. When Stock Exchange securities are. depressed, one can be sure that most other securities will be depressed, and that commodity prices will fall. One market affects another, and although the markets appear not to have any connection they meet on common ground when money becomes dear. We may therefore expect to experience a measure of dullness, which will be relieved to a slight extent by the activity in the export trade. At present there are not many concerns seeking the support of the public. •The prospectus of the Australian and New Zealand Bank lias been before the public for some time, and apparently the shares are not being taken ‘up as quickly as the promoters anticipated. The prospectus of the London and New Zealand Bank, for which the promoters obtained a charter from our Parliament, has not yet made its public appearance, and it is’ obvious that those who insisted that another bank was wanted in the Dominion have had cause to change their views. The banks have not as yet altered their lending rates, but they may be forced to do that later by the conditions ruling in Australia.. It is a time for saving, for economy, for the exercise of prudence and caution. Conditions will not remain as they are. There must be adjustments downwards, and when these are effected trade and commerce will begin to hum again.