FINANCE AND INVESTMENT
By. CUSTOS
As usually happens when markets fall into an indeterminate condi- tion, two schools of thought have emerged. At the moment the pessimists in Throgmorton Street are arguing that values are too high, that the Treasury has availed itself of powers akin to witch- craft to hoist gilt-edged to unwarranted heights and that the day of reckoning is at hand. On the other side of the fence, the optimists take the view that markets are merely running true to form in calling a halt to the advance at a time when ideas have to be reviewed.
THE MARKET OUTLOOK
According to this view, to which I subscribe, the victory in Tunisia , has disturbed the investment outlook. Some remain resigned to a `long war but others are now beginning to think in terms of a reasonably early victory. What is more important, there must be a very large number who are no longer able to continue on the comfort- able view (from an investment standpoint) that the war will continue indefinitely and that thinking is largely unnecessary. In these conditions, there must be hosts of investors who have temporarily lost their bearings. Who can be surprised, therefore, that markets are inactive and dull?
My own feeling is that prices will not slide far and that weight of money will soon begin to tell again. Buying, when it is resumed, will be on highly selective lines, but will be sufficient to turn prices upward. A recovery in gilt-edged may well lead the way.
I.C.I. RECORD
Record income of Imperial Chemical Industries, Britain's largest industrial enterprise, reflects further expansion. Total gross income rose last year from £19,956,000 to £22,182,000, and the 8 per cent. ordinary dividend has been comfortably maintained. I like this group's finances and am convinced that the post-war as well as the war-time prospect is good. At the same time the ordinary Li units, at 39s., to yield only a fraction over 4 per cent., look to me to be fairly valued. They are a sound but unexciting investment.
A RECOVERY SHARE
A depressed share which has good chances of capital appreciation is Steaua Romana (British) Li ordinary around 6s. 3d. This com- pany, associated with the powerful Shell group, has an oil property in Rumania now in enemy hands. In addition, however, it has no less than L7oo,00o in investments in London. iDeducting the small prior claims there is the equivalent of about 6s. 6d. a share in investments, quite apart from the Rumanian oil property carried in the books at Li,7oo,000. This means that a buyer at today's price is merely paying the market price for the investments, getting the property for nothing. In pre-war days dividends of 4 per cent. were regularly paid and the shares ranged between los. and 13s. 6d.
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