FINANCE AND INVESTMENT
by CUSTOS • •
JUDGED as a whole the stock markets are standing up well to the political uncertainties, domestic and international, which now obscure the investment prospect. Gilt-edged, after a gentle slide, -have recovered most of the ground lost since VE-Day and are now strengthening, on the theory that when the Exchequer Bond "tap " is turned off the Treasury will seize the occasion to give the cheap money screw another slight turn in its own favour. If, as is by no means improbable, a new 21- per cent. Bond with a rather longer life than has hitherto been thought practicable at such a rate of interest, is introduced, gilt-edged stocks should consolidate their improvement with a tonic effect on other sections of the market.
POLITICS AND EQUITIES As for the more speculative groups, among which I must include even the best industrial Ordinary shares at the current level of prices and yields, I am still disposed to recommend caution. Admittedly, stock is well held and investors are still in a mood to give hope the benefit of many doubts, but I remain unconvinced that prices would be proof against a Labour majority at the coming elections. Investors must make up their own minds about the election chances, but those who regard the issue as very open would be well advised to trim their sails accordingly.
In counselling caution I am not suggesting that a Labour Govern- ment—even one with teeth in it—would be likely to wreck the country's finance and trade. Cheap money and full employment would remain in the forefront of the economic programme. What I do suggest is that the City would not like a Labour Government, would exaggerate the risks and that only a moderate volume of nervous selling would have a disproportionate effect on prices in a thin market. Nor would the disadvantages, from the capitalist investment standpoint, be entirely imaginary. Nobody can suppose that a Labour Government's policy in such matters as E.P.T. and income-tax would be as helpful to equity investors as that likely to result from a Conservative majority.
I.C.I. RESERVES The main interest in the full report for i944 of Imperial Chemical Industries lies not so much in the profit figures, which show com- paratively little change, as in the form in which the accounts are presented and the immense strength of the group's internal finances. It is greatly to the credit of the board that in spite of the complicated structure and widespread interests of the group the accounts are issued in accordance with the principles laid down by professional accountants and with the more enlightened evidence submitted to the Company Law Amendment Committee: The profits are broken down into trading and interest items, the group charges for Ey.T. and income-tax are shown separately, there are comparative figures and a consolidated balance-sheet and income statement. The figures are, in- fact, presented in such a. way as enables every intelligent stockholder to appreciate the position and progress of the whole gronp.
Continuing their conservative distribution policy, the directors are merely maintaining the 8 per cent. dividend on the Ordinary stock. In doh* so they are able to make subitantial transfers to reserves and to strengthen still further the Central Obsolescence and Depreciation Fund. Reserves shown in detail in the paten: company's balancexsheet consist of a Free Reserve of Lio,000,000. Capital Reserve of £2,00o,000? War Contingency Reserve 01 L3,250,000 and Central Obsolescence and Depreciation Reserve of L12,275,000. As to the trading outlook, the directors remark that home demand for the group's products has been well maintained. although they note a falling-off in certain Government requirement, for war purposes. On the other hand, reference is made to expansion in demand for the products of the dyestuffs and pharmaceutical groups. With its interests widely spread, both in the home and export trades, the company should not experience any serious setback in earnings such as to jeopardise the Ordinary dividend during the - transition period. Quoted at just under £2, I.C.I. LI Ordinary units, yielding just over 4 per cent., are a sound industrial holding.
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