The Rise in Rubber
BIG SHARE MOVEMENTS.
AN outstanding feature of the past week has , been the rise in the price of rubber which at one time touched 10d. per pound, being the highest point reached for seven years, while it is over 3d. per pound above the level of a year ago. Not unnaturally, this great rise in the price of the commodity has been accompanied by a considerable recovery in the price of rubber shares, in which dealings became increasingly active during last week, speculative attractions of the market being probably increased by a remembrance of the giddy heights touched both by rubber and rubber Shares -sonic sixteen years ago. . • .
For, curiously . enough, memory seems to' be .stronger in recalling the circumstances of a great boom than of the slump which followed it. It may be well therefore perhaps to call to remembrance the fact that while in 1910 the price of rubber itself touched 12s. 10d. a pound, it dropped on one day by is. a pound, and as recently as 1932 the price touched 1/d. per pound. As so often happens when a commodity booms in price, the abnormally iiigh level stimulates production, and in the case of rubber the high price did something more than stimulate ordinary production, for it resulted in the estab- lishment of a new -industry which became known as "reclaimed rubber," and occasioned the slump both in rubber and in rubber shares.
CAUSES OF PRESENT RALLY,
The slump in rubber was accentuated by a prolonged world-wide depression and the recovery has been assisted in the first place by restriction of exports on the part of the rubber-producing companies and later by the trade 'revival which, together with a tightening of the restriction .scheme, has brought about a steady rise in price during the past eighteen months. In that period, world stocks have 'been steadily reduced, and -are now t estimated at about 466,000 tons, being a 'reduction on the 'year of not far short of 200,000 tons. Latterly, too, Russia has :been a heavy buyer,. while the greater' activity of the ,American motor industry has absorbed large shipments from the East. During last Week : the International Regulation Committee which controls exports find production increased the eipOrtable quota to 75 oq cent. of standard rubber for the first three mcinths Of next year and to 80 per cent. for the second three months, but under present conditions in the market the inereiiie has had practically no effect on Supplies of rubber fiir near delivery. American consumption last month was :50,300 tons, against 42,800 tons for the same mon*
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in last year, while a fact probably more directly responsible for the run-up of prices during the last few days has been that large purchases of forward rubber made by London interests early in the present year have resulted in available supplies becoming concen- trated in very few .hands, a position not altogether desirable for healthy conditions in the market, but one which easily explains the recent sharp rise and may yet be responsible for a still further advance: *
RISE IN TILE SHARES.
I have already noted the rise in the price of the com- modity and how quickly the shares have responded may be gathered from last Friday's quotations of a few of the leading shares compared with the quotations of a week previous. Dec. 11th. Dec. 18th.
s. d.
s. d.
Allied Sumatra (£1) 20 9 23 0 Anglo-Dutch (£1) 37 9 43 3 London Asiatic (2/—) 4 10} 5 ,3 Rubber Trust (£1) 39 3 44 0 Linggi (£1) 23 3 28 3 Malayalam (£1) 37 9 40 9 Thad. Sua Betong. (£1) 70 71 80 0 Vallambrosa (2/—) 11 3 12 9 Highlands and Lowlands . . (X1) 40 6 43 0 Lumut (£1) 35 0 38 9
That the foregoing quotations in all cases show substantial premium on the nominal value of the shares will readily be seen, but by way of emphasising the extent to which prices have appreciated it may be useful to note that Allied Sumatra were as low last year is Hs. 6d. Anglo-Dutch touched 10s., and Highlands and Lowland; touched • 27s. Not -only so but at the present prices the yields on most of the shares are comparatively insig- nificant and can only be justified by a great inCrease in profits in the near future. I am far from Suggesting that such an increase may not take place, but consumption of rabber has its limits. Important and useful as the commodity may be and while present indications suggest the probability of a still further rise in the price both of the commodity and the shares, I do ncit think that the movement should be trusted too far. ) Thtifir4u:ket is more suitable for the gambler than for the investor.
A. K.
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