13 DECEMBER 1940, Page 36



MARKETS were looking for a lead, and the offensive in Egypt has provided it. The first effects, as one might expect, have been a resumption of the rise in gilt-edged and an upward adjustment of values over the whole range of securities whose prospects are linked with the Mediterranean situation in its widest sense. Thus we have sharp rises in Egyptian Unified, Sudan Plantations, Kaffirs and oil shares, all of which have been valued with a liberal allowance for the war risk in recent months. If the military developments go well the recovery in these groups will gather pace.

Nearer home the influences on markets are still very mixed. Higher taxation—though I do not rule out the possibility of a reduction in E.P.T.—lies ahead, and so does a progressive curtail- ment of public spending. This can only mean that while for a very wide range of equities current dividend rates form a ceiling, for other groups they do not provide a floor. Buying of equities is likely, therefore, to become increasingly selective.


Rather earlier than had been expected the Canadian Pacific Railway has declared a furthei 2 per cent, payment on its preference stock. Thus the dividend for 1940 is brought up to the full 4 per cent. Recent traffic figures have been erratic, but thanks to the increased industrial activity implied in Canada's war effort gross traffics for the first 47 weeks of this year have risen by 17,080,000 dollars, of which over 7,000,000 dollars has been retained as a net increase in railway takings. As the 4 per cent. preference dividend requires only 5,500,000 dollars at the current rate of exchange, a figure which was easily earned although not paid in 1939, it is obvious that the company is now covering the full dividend by a large margin. Yielding over 81 per cent., C.P.R. Do° preference is still good value for money at £47.


Scarcely a day passes without some fresh criticism being levelled against the Government's taxation policy. How many- sided the objections are to a high general rate of tax flanked by a too per cent. E.P.T. is clear enough from the speeches of company chairmen at recent meetings. Mr. F. L. Gibbs tells shareholders in Rhokana Corporation that the incidence of E.P.T. means that they will derive no benefit from higher production which involves using up a wasting asset. This company's operating profit for the year to June 30th rose from £2,136,041 to £2,869,978, but after Lr,65o,000 had been charged for taxation the net balance was reduced and the dividend was cut from 5o to 40 per cent.

Mr. Arthur Mitchell's speech at the Mitchells and Butler's meeting reminded the Chancellor that there were limits to the burdens which even the brewing trade could stand. Trading profits had risen in spite of higher costs, but for the second year in succession taxation had turned an increased trading balance into a smaller net distributable profit. Taking beer duties and taxation together, the company had paid no less than L4,200,000 to the Government last year. At the Guy Motors meeting Mr. Sydney Guy put a strong case for a reduced rate of E.P.T. At present, he stated, the too per cent, rate, accompanied by in- adequate allowances for depreciation, compelled the company to dip into lits liquid resources. He envisaged a position in which concerns which in 1939 were in a healthy state might emerge from the war denuded of their working capital.

GOLD FIELDS' RESERVES Like most of the Kaffir finance houses, Consolidated Gold Fields of South Africa has suffered a sharp setback in profits. For the year ended June 30th net profit, after tax, was down from ,C577,866 to £345,210, and the dividend has been reduced from 161 to to per cent. Much of the fall in profit is attributable, of course, to the necessity to write down investments to their market value. At the meeting the chairman, Mr. H. C. Porter, explained that the board had again followed a rigorous policy in this matter of investment depreciation despite the abnormality of the times. Since June 3oth there has been a considerable improvement in market prices, which obviously eases the position. At 32s. 6d. Gold Fields Li shares yield 61 per cent They should be held for recovery.