Trade and Finance.

Taranaki Daily News, Volume LVII, Issue 21, 15 June 1914, Page 6

Trade and Finance.

■■ INTERESTING DEFERENCES. BY CHAIRMAN OF BANK OF NEW ZEALAND.

At the annual meeting of the Bank of Now Zealand, the chairman reviewed existing trade and financial conditions. The London money market underwent a sudden transformation early in the year. The best informed financial writers in London had failed to predict the impending change. In December last, there was very little prospect of any case in the money market, yet by the middle of January it had become clearly evident that money was in abundant supplv. The New South Wales 4 per cent."loan for £3,OOO,T)OCr issued during the first week in January at .the price of £9G was a failure, as the underwriters were saddled with !)0 per cent of it, that is to say, the public subscription only amounted to 10 per cent. A fortnight later, the Victorian loan of £1,000,000 also at 4 per cent., with a minimum issue price of 97, was sub- | scribed threefold and formed the first '• of a succession of loan issues (including one of the New Zealand Government) which were eagerly subscribed for by [ investors.

[ Imperial Consols, ■wii'ioh during 1913 had dropped to £7l, and which during the first week in January stood at £7l 15s, a fortnight later had risen to £74 —an advance of £2 5s in two weeks. An immediate improvement in Colonial 'Government stocks also took place, and prices, on the wl.ole, have *ince been well maintained. > Tire upward move'ment in Consols continued, and on February 4 the quotation was £77 12s fid, thfe highest recorded for a long time. This turn of affairs was very acceptable, for gilt-edged securities liad suffered very severely during 1913, and .the English banks had to use over two millions of their profits to meet the declension in values.

The Bank of England discount rate, Which had stood at 5 per cent since the 'beginning 01 October, was reduced on January 8 to 4'/ s per cent. On January 22 it was again reduced to i por cent, ancl on January 29 to 8 per cent, at wihicJi it now stands.

The buoyancy of the money market induced many Governments to issue loans in London. Now Zealand, and every State of the Commonwealth, have been on toe market, and have Iplaced their loans successfully. The New Zealand Government 4 per cent loan of £4.i)00,000, issued in January ■ —£l,ooo,ooo for redemption proposes, the balance for Public Works—was a great success. The minimum price of issue was flOO 1 /., as compared with f08 l / 2 for the tast preceding loan oi £3,500,000 issued in October, 1013, clearly indicating the improvement that had taken place in the interim in the condition of the market. Upon tflie opening of the lists l , a strong demand was apparent, and within an bom- and o. lhalf| applications totalling £25,800.000 were received. Tl'te limits were then closed. The scrip immediately went to a premium of 1 per cent.

The time for emission of the loan wis well chosen, aim trie results no doubt exceeded all expectation.

In tile course! of my remarks at ou v last meeting. I pointed out that the New Zealand Government h;ul been able 'to obtain for its October loan (he highest price of the year for Coiom 1 ! Government loans. It ha.* mainta'ned that position in its recent issue. Some aut-horitiei liol-.l the opinion that the troubles that have, of late been experienced by the bond-holders of some foreign states (Mexico and Brazil), will operate 'in the direction of enhancing tflie popularitr of British and Oversea Dominion securities, as being, though less remunerative from the point of view of annual yield, decided.'v more dependable as regards security of both principal and interest. The inference seems reasonable, a? we mav perthlaps bope to see the stocks and bonds, not only of the Dominion Governments. but also of the municipalities and other local bodies of tne British dominions, presently increasing in public, favor. Although loans, colonial and foreign, have been issued in London with so/iisiderable success during the pawt five or six months, and the value of money there is at present low, the terms- of which notations can be arranged remain comparatively Mgh, and political disturbances may at any time send them

I still higher. Caution is no doubt being exorcised by Bviti-lh ■financiers, and tliat there is need for it is" evidenced jt the unsatisfactory state of affairs in .Mexico, and the financial' troubles in France, China, and Brazil. According to telegraphic messagas to .the Press, France ii under the necessity of raisingr some £24,000,01)0 almost immediately if she is to be in a position to meet her obligations. China and Brazil are suffering from financial stringency, whi'e Mexico, after a period of exhaustion from internal dinarchy, is now at war with the United iStates. Some weeks aso the financial conditions in Mexico ffi"'c extremely bad. and exchange had reached the worst point known for many years. British investors have very extensive interests in Mexico, and the "clean up'" will involve, many millions sterling. The United States Government alone talks of providing war funds to the extent of £30,000,000 sterling. There are other contingencies also thait may jeopardise the money market or at least carnse a disturbance. In past years Great Britain has lent vast sums to finance tih'e trade and industries of the world, and the disbursements under this head are worth recording. The demand for capital suppMes is pouring in from all parts of the world, and appears to be quite insatiable. Yon will appreciate the immensity of the'"rush" when T tell yon that the applications dealt with in the London market during the first two months of the current year amounted to nearly 72',/, millions, 'being nearly double tkle amount dealt with during the corresponding periods .of csu-h of the three preceding years. Such an enormoiH turnover must, if continued, sooner or later exhaust the supplies and 'lead to an enhancement of money Yahies.

Tho condition of trade is, of course. nn important element in forecasting the future of Hie moncv market. For the past four years, trade lias been active and money lias been dear, but the boom in trade seems to have, ended, and •slackness may now prevail for some time. iSomc of the relief of the monetary tension. wMtfh hiw -been experienced, bas been a consequence of this. The British Chancellor, Aiowever, stated a few weeks that lie did not anticipate anv saviour sct-bacK. in trade, and. while the phenomenal activity of 1!)13 was not likely to he repeated, he expected the trade of 1914 to be up to the average. It will not be safe, therefore, at livesent, to count upon a .prolonged period of cheap money. Locally, there' is a tendency towards ease, but it is not at present pronounced, and no reduction of the ruling rates for accommodation ia, in tire meantime, likely. We hive also to (boa* in mind that the gold production of the ■world exhibife a shrinkage tendency. The labor v ;trolMes "ia_:'"tt*e TxSneVail <an.il 1%

war in Mexico will lead to a restricted output in those countries. GENERAL TRADE.

As I have already remarked, the boom in trade seems to have ended. There is ! evidence furnished by nearly every commercial centre in the world that trade is less active than it was. Rome incline to tlsc view that a period of depression is setting in. Last year wa.s a record year for British trade, the combined imports and exports amounting to the icolossal sum of £1,404,151,000. Eight years ago, viz.. in IfMli, the aggregate was only £1,,61i8/>fi5,030. Tuc increase to last year's figures represents a growth of 31.40 per cent during the period. Most, if not ;u", of the leading countries in the world enjoyed extreme prosperity throughout : 1913. That condition, however, appear? |to e.\fe|t no longer. There are, more. I over, at the moment quite a number of ! "lame ducks." The Balkan States and Turkey are suiTerins; from, the effects of the recent war; Mexico is, ;is I have already observed, the victim of laimrdhy; and Jhina has been in financial straits for some considerable time. Brazil is also in a bad way! owing mainh' to the collapse of the' -nulibr/r market. The purchasing powers of the peoples in these countries, »re, as a result, very much restricted, and trade suffers in consequence. I NEW ZEALAND TE...JE,

So far as this Dominion is concerned, trade is satisfactory. Our exports for the year ended March 31 last attained a. record level.

The past year shows an increase of £020,904. or 4.3 .per cent, as compared with 1012-13, wihielhl year exhibited an increase of over £3,i>Oo.Oofl ai compared with 1911-12. The increases for tJlie paso year are derived maimy from dairy produce and frozen meat.

WOOL. For the year, there is a shrinkage in the value of the wool exported amounting to £471,882, and the quantity is also less, fflie total being 152,854,0G91bs against 105 > 782,5431 ; b5.' The wool market is in a very licnltliy condition, prices are high, and the demand is active. Australasia- Was not ai=s yot felt much benefit from the free admission of raw wool into the United Kates, because the American manufacturers have been obliged to adjust their affairs to suit the changed eonditipn". No doubt American competition will presently make itecif felt in tJiis market.

FROZEN MEAT. For the yea r ended 'Jfnrch 31 kst there was a very s:ib-,tantiai' expansion in the exports of frozen meat, aspeciin mjittou and lamb. Compared with the previous year, the increases were as follows: Lamb £723.602 Mutton £3"IM"\ Beef £122.238 £1,217,700

I am inclined to think that t'hfe increase in- mutton and lanuo is exceptional, and that next year will show a fall. Accordingly., it is probable that the sh-. en returns will disclose a shrinkage in the floclw. If this bo correct, a dron may be expected in the volume of next year's exports. The flocks of '.(.lis Dominion are practically stationary. Any increase is quickly sent to the freezer.

A great deal >of perturbation 'has been occasioned by the persistent

r'imo" that the American beef trii*t Ims secuivd a footing in this Dominion. Tt is well known that two -powerful American firms, a'-pooiated with tlie recentlv dissolved organisation known as the National Packing Conroany, ihave been operating in New Zealand. The-e corporations command immense financial resources, end while they confine themselves to buying meat for export in the usual wav, their advent in the Dominion will not occasion us any concern, Should thev seek to extend their onerations and to secure a monopoly of the memt tra-'o her" tnere is no doubt t':ie New Zcikind Government would take the matter in hand, and, if nocpssnl"". legislate to prevent n renctition. in this Dominion, of the tactics which the combination is understood to have pursued elsewhere.