WELLINGTON NEWS

Hokitika Guardian, 20 December 1929, Page 2

WELLINGTON NEWS

AUSTRALIAN SHARE MARKET,

(Special Correspondent ) WELLINGTON, Dec. 17. According to a report in the “Argus” (Melbourne) Australian Stock Exchanges have been experiencing a period of weak prices after it was thought that prices bad been marked down to conform to the prevailing adverse economic conditions, and although a few general investments have been able to withstand selling pressure the section on the whole has suffered a severe set back'.The paper says: “Although l.there may be justification for a fall in price below the level touched a month ago, the feqling among (genuine investors is /that /the depreciation in. values in the last few days has been out of proportion to the probable reaction in the earning power of the industries concerned.” It seems that on the Australian exchanges brokers are dealing in shares on their own account, and in the capacity of “bears” and speculator. The “Argus” in a recent issue says: “In recent months the exchanges have experienced one of the most depressing periods in their history, all the more marked because the general fall in prices followed a strong upward

movement, inspired by the faith of ' investors in the ability of leading industries to obtain a strong position. Much of the business at falling prices however, has been done not on behalf of the public, but by brokers in the capacity of professional speculators. The exchanges exercise strict control over the business conduct of their members whose integrity is not questioned ; but the constitution of the exchanges .wants revision to prevent professional speculators from weildimz so much power in the making of markets for stocks and shares. It is Baid that speculators are an asset to a market. In some measure that may be true, but the speculating should be done by those who employ the brokers and not by the brokers themselves. Prices had to come down, but they should have been allowed to decline under influence of orders placed by the investing public, not under the added pressure of the operations of “bears.”

The New Zealand Stock Exchanges are depressed and it is doubtful whether the limit of the decline has been reached. Investors in the Dominion have “gone blind” on bank shares for they were regarded as a sound and safe investment, but when values are pushed up to a giddy height there must be a decline and that is what has happened. At the prices ruling in September the return to investors on money invested in bank shares .wavin a few case>s higher than 5£ per cent, and in a good many cases it was below 5 per cent. These rates were scarcely good enough when compared with rates obtainable on equally sound anil.safe investments. Investors by competing agaipst one another and accepting the advice of others principally brokers they paid prices higher than were warranted by the intrinsic merits of the securities, in point of fact bank shares were overlooked and sharebrokers must .be saddled with some of the blame for they could and should have warned clients against placing values on shares to yield such low returns as quoted above, unless of course there were special circumstances as say the issue of new shares at a premium below the market assessment. This was not done and many investors who /bought up .'bank shares at the high prices ruling so recently as September last, and it is instructive to give a few illustrations of what the loss has meant to investors.

In September the prices of Bank of Australasia shares was .£l4 12s Gd, while a few days ago they were at £l2 17s, a decline of 355; the market price of Union Bank in September was £l4 13s; they have since sold at £l3 13s, a drop of 20s; the shares of the Commercial Bank of Australia are 10s paid up in September were selling at 28s 3d and now they are worth only 25s 9d notwithstanding that a fresh issue of shares is to he made in January at £1 each including premium. Australian Bank of Commerce; have dropped from 33s 9d to 295, the. shares of this bank being £1 paid up. At 33s 9d the return to the investor was only £4 14s 9d per cent which obviously was absurd. This bank has just suffered a loss of £SOOO through a clever swindle. English/ Scottish and Australian bank shares are £3 paid up sold in September at £8 5s and now they aie only worth £7 11s if that. National ißank of Australasia £lO paid up have dropped from '£l9 10s to £l6 7s 6d, and the £5 paid up from £9 10s to £B. The losses suffered by those’who bought bank shares in September are substantial and the important question for investors is whether bedrock has been reached. The Australian conditions fare bad—considerably worse than in New Zealand and presently there will bo a considerable pressure to sell with a conspicuous abseneo bf buyers, and under such circumstance's present reduced values will not be maintained.