SOUTH AFRICAN LOAN FAILS ON LONDON MARKET

Wanganui Chronicle, 1 December 1949, Page 10

SOUTH AFRICAN LOAN FAILS ON LONDON MARKET

LONDON, Nov 24.—Reception on the market of South Africa’s £10,000,000 3* per cent, loan, which was subscribed only 16 per cent, when the market closed, is described by Reuter’s financial editor as the worst underwriting failure in recent memory in the gilt-edged market. Initial dealings which began at a discount of between 4 and 2 per eent. were described in the market as a “dreadful result.”

Commentators said the result of the loan showed lack of money in London for such issues and absence of real confidence in the gilt-edged market. They mentioned the political uncertainty of Britain and South Africa as contributing to the lean’s failure. The result was much worse than eppected. It had been thought that the loan might be regarded as a halfpoint too dear and that underwriters at the worst might be left with 40 per cent, of their commitments. Reuter’s financial correspondent say it was as a test of the market for future loans-including the big operation which the British Treasury must undertake before the £787,000,000 of the Exchequer bonds mature next February -that the South African loan was regarded as a failure. The result suggested that the British Government broker’s recent intervention in the market had not restored real confidence among investors. The nearest parallel to today's poor result was in June, 1947. when 83 per cent, of the Southern Rhodesian loan was left with the underwriters. In sharp contrast to the South African result today, the subscription list for Rootes Motors’ 2,000,000 preference shares issue closed in five minutes heavily over-subscribed. Repercussions in other sections of the Exchange were small. The gilt-edged opened dull hut steadied later. South African gold i shares showed further dwindling of business rather than any weakening.