WELLINGTON NEWS

Hokitika Guardian, 7 November 1929, Page 2

WELLINGTON NEWS

THE MARKET PRICE

(Special Correspondent )

WELLINGTON, November 4. ' This is an expression that is in daily use in all markets and is -a- conimoh expression on the Stock Exchanges, Some brokers consider that the.middle price, that is the difference between buver and seller halved: With other brokers if. it is a buyer, that wants to know the market price- of any Shares, the sellerts'-quolatibh for those shares would be given as the price; if*a seller is making the inquiry then the buyer’s quotation would be substituted., borne brokers give both the buying, and selling quotations and leave the inquirer, to arrive at/ the - market price in his own way. It would puzzle the most expert sharebrokers in the Dominion, if there are any such, to define the market price of bank shares just now. The share market is jumping both here and in Australia and it is quite a matter of chance whether one picks up a bargain 'or buys at too high a price. A case in point occurred one day last week in respect to Bank of New South Wales shares. They sold in the morning at Wellington at £47 15s per share, while at about the same time there was a sale in Auckland at £4V 17s 6d, and in the afternoon there was another sale i,n Auckland at £47 10s. What is the .market; price of the shares ? Here we kave three different prices recorded on .the ' same day and the variations are 2s 6d per share and 7s 6d per share, The investor who bought at £47. 17s'tyl was, to say the least of it, unfortunate, while the one who bought at £47 10s was very lucky. Perhaps all three bought at the market price of the day, or more correctly the hour, for,apparently prices are varying every

hour. x Another' anomaly is to he noted on the returns in bank shares at recent prices. The Australian Bank of Commerce, a purely Australian institution with no branches in, . New. Zealand, usually pays dividends at:-the rate of 8 per cent... The shares’ of that bank were sold the other day at 3ps 9d and the income retbrn at - this price .is £4 14s; 9d . per, cent approximately. The English, Scottish and Australian Bank,

another purely. Australian institution, pays dividends of 12jf per cent and its 1 shares were sold at £7 16s, yielding approximately £4 jlGs' 2d. The Bank . of Australasia, which distributes 14 per cent in dividends, was sold at £l3 15k, the 1 income yield being £5 2s'" per cent, and the Commercial- Bank of 'Australia, ,now securing- a solid;,' footing in .the banking system of the Dominion, usually pays out lo per cent dividends, and the shares of this hank recently sold nt 26s ’ : the yield being approximately £5 15s 4d per cent. ' Why this disparity in the yields? It is TTotibtiful whether any ".broker could answer the question satisfactorily. But there is another question that requires some consideration. What is to be regarded .as-a fair return from capital invested in bank shares? Of ten banks listed on the Dominion exchanges three yield under 5 per cent and. the others return 5$ per cent and 5* per.cent. Bank shares are.no doubt very good securities but they are liable to price variations. They are gilt-edged-to this extent that they are negotiable, and no doubt it is because of their fluidity that there are such pripe; variations in the shares of the same bank. The jumpy, ivegular nature of the Stock Exchanges here and in the Commonwealth have no connection with the happenings bn the New York Stock Exchange; The break in prices here is due to local conditions. The lower prices ruling for wool and.frozen meat will reduce the income derived 'from exports. There will be less money available for expenditure arid less money; to save. In the past two years the balance of trade was very much in our favour and the spending power of the community was large and savings were large also. These' savings were to a very great extent invested in shares, and bank shares in particular, and through competition Shares were forced up to prices that became top-heavy as soon as support was withdrawn, and price's tumbled down. The position is worse in Australia than it is in the Dominion. Because share values have eased off it does-not mean that there is any great shortage of money. The banks have ample fluids for financing the trade of the country, but there is a, growing shortage of funds for investment in Stock Exchange securities. Furthermore, owing to the fall in the prices of produce many holders of shares have found it necessary or desirable for one reason or another to sell but, and with many sellers and few buyers prices have tumbled. It is hardly likely that money, that is bank money, will be . any dearer than it is now, nevertheless borrowers for other than normal trade purposes will find some difficulty in satisfying their requirements. The lesson to be derived from the situation is that it is most desirable that everyone should save and so provide the needful capital.