FINANCE AND INVESTMENT
By CUSTOS
INVESTMENT markets are in an interesting phase. For the moment the emphasis has shifted fro:n gilt-edged to equities, not because of any widespread inflation fears but simply through yield con- siderations. When the net return on long-dated Government stocks is whittled down to less than 2 per cent. it is only a question of time when money overflows into investments offer- ing anything between 5 and ro per cent. That is What is happen- ing now. There is no evidence that people are selling gilt-edged to reinvest in equities or, for that matter, that the fixed interest groups are not stiff receiving the lion's share of the investor's business, but the overflow into equities is sufficient to bring quite a sharp improvement in prices.
Se far, front-rank industrial ordinary shares, such as Imperial Chemicals, Courtaulds, Distillers and General Electric, have been the investor's most popular choice outside the gilt-edged field. The yields range between 5 and 7 per cent. on this type of share, which seems good enough in relation to the meagre returns offeling on well-secured fixed interest investments. Those who are not scared by high yields have ventured into home railway, junior stocks, like L.M.S. 1923 preference, Great Western .ordinary and Southern preferred, the attraction being a yield of to per cent. or more even on the basis of the guaranteed minimum net revenue under the present agreement. As I have often emphasised in these notes, yields on this scale make generous allowance for the uncertainties of the railway prospect. It is good to see rubber and tin shares at last coming into their own. Week by week rubber dividend announcements under- line the strength of the industry's position. Selling prices leave a good margin of profit, and most of the companies have an excellent standard for E.P.T.
RHOKANA DIVIDEND CUT
Copper shares were just beginning to join in the recovery movement when they were effectively halted by the reduction of the final dividend of the Rhokana Corporation. Why the market should have been budgeting for a final of at least 25 per cent. in view of the company's known vulnerability to E.P.T., I cannot understand, but the cut to 15 per cent., which reduces the total for the year from 5o to 40 per cent., seems to have come as an unpleasant shock. Like Mufulira, the Rhokana earned larger profits in the year to June 3oth, the published figure showing a rise from £2,107,100 to £2,549,000, but the distributable profit, allowing for taxation, is substantially lower. Around £7 Rhokana Li shares yield about 6 per cent. They are very fairly valued for the present.
MINING GROUP INQUIRY
There must be few official documents whose publication is the investor's legitimate interest which have found the light of day so painfully slowly as Sir William McLintock's report on the de Bernales group of companies. Three months after the Board of Trade delivered this report to Mr. de Bernales and his co-directors shareholders are being allowed to examine it within the hours of ii a.m. and 3 p.m. by visiting the com- pany's offices in Gresham Street. So voluminous are the in- spector's surveys that they cannot possibly be read at one sitting, so that until the full prints -are available—in about a fortnight's time—judgement on the group's affairs must still be withheld.
One thing, however, is sufficiently clear. Sir William McLin- tock has severely criticised several aspects of the group's finan- cial activities. Mr. de Bernales will doubtless make his reply, and in due course shareholders will, have to make up their minds about a reorganisation scheme. Very few, it seems, Of the group's investments are of real value, which dearly points to some sort of merger to preserve the good assets and write off the bad. It is not surprising to learn that the board does not intend at present to seek the restoration of quotations for the group's shares on the Stock Exchange.
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