THE FINANCE OUTLOOK.

Taranaki Daily News, 20 May 1921, Page 5

THE FINANCE OUTLOOK.

MOVEMENT OF GOVERNMENT STOCKS. MR. HAROLb BEAUCHAMP’S COMMENT, An improved demand for investment stocks and shares has been apparent during recent weeks. Buyers have been more numerous, and prices of Government stocks and bonds have shown a slight advance. The prevailing opinion in commercial circles, however, is that the movements of the market ought not to be interpreted too optimistically. The evidences of financial depression are still very strong, and a substantial improvement in the outlook for New Zealand’s staple exports is required to make the situation easier.

“The rise in the price of Government stocks appears to be due to the fact that a certain amount of money is available for investment among people who are indisposed to invest in any industrial concern or to make purchases of land until there is some indication of the resumption of normal conditions,” said the chairman of the Bank of New Zealand (Mr. Harold Beauchamp) to a Dominion reporter. “In the meantime these people are finding a most profitable investment in Government stocks, especially thos’b which are free of income tax, at the rates that have been ruling lately. Some of these stocks, paying 4| per cent, interest free of income tax, were at one time down as low as £77, and at this rate fairly large purchases were made. At that time there was not a very big supply of the debentures, and as the demand continued they naturally commenced to soar upwards, with the result that the price to-day is £Bl 10s to £B2. If, however, many sellers came on the market, I have no doubt there would be an immediate recession in the value.”

Another factor was pointed out by stockbrokers on Tuesday. The Government stocks and bonds declined in price during March owing to fairly extensive sales by persons and firms who required to improve their bank balances before the end of the quarter. Money was difficult to obtain then, as it is now, and some of the realisations were more or less forced. Sales were made here and there at prices below the values recorded in the stock exchange lists. This movement naturally depressed the market, and in the opinion of brokers the rise in prices that has taken place within the last few weeks irtfay be regarded in part as a recovery due to the removal of e an abnormal influence. The movement is illustrated by the case of the New Zealand Government Inscribed Stock, 1939, which was quoted on the Stock Exchange at £BB 10s (buyers) on January 15 last, £Bl (sellers) on March 31, £7B (buyers) on April 22, and £B2 (buyers) on May 16. The financial situation generally in Wellington is very dull. There is a strong demand for money, but the quantity available is small. Investors are being offered some attractive opportunities, but they are showing a disposition to take a conservative view of prospects. Generally speaking, they will not lend money on mortgage, even at 7 per cent, without a very wide margin on a valuation well below the level of recent years. A good deal of the money that normally would be made available for the use of the producing and manufacturing industries, is being invested in Government stocks, which at the reduced prices give a very good return with a reasonable assurance against depreciation. The demands of the trading community are increasing the difficulties of the money market as far as the farmers are concerned, and comparatively little land is changing hands at the present time. Agents state that alert buyers in posession of cash have been able to secure some bargains in farm land lately, but it appears that most of the farmers, even those whose financial difficulties are serious, are sitting tight and hoping for better times. The high price of money and the insistence upon liberal margins have eliminated the merely speculative buyer to a very large extent.

Financial circles are watching developments in the wool market with very keen interest, since very much depends upon the ability of the farmers to sell their wool. The improvement recorded at recent sales of free and Bawra wool has had a cheering effect, but it is recognised that the prices are still too low to give ground for sanguine expectations. “We realise that the farmer is in for a bad year, and that we must all suffer with him,” said one commercial man on Tuesday, “but we will all be cheered up if we see that the farmer is going to get enough to keep him going. You can say that at pm-at w« are ia a State of aUfjHM*'"