Market notes
CUSTOS
The Government broker finally won the day in the gilt-edged market, having more than ab- sorbed the sales. In spite of the most menacing foreign news, government stocks, both 'shorts' and medium-dated, have held fairly steady this week. The 'longs,' however, went easier, but War Loan, quoted at 52i to yield 6.6 per cent, is out of line with a 5f per cent Bank rate and a Treasury bill rate of 5.2 per cent.
Equity shares were dull, more for domestic than for external reasons. The sharp cut in the Reed Paper dividend did not help matters and Mr Callaghan has said that he was not going to be pushed into hasty reflation. That hardly supported the brokers who have been arguing that equity shares had entered their next bull market. Beechams restored sentiment temporarily in the market by turning in an ex- cellent report—thanks to the 32 per cent rise in their overseas earnings. The dividend is raised two points to 25 per cent and is well covered by earnings of 42 per cent. The shares rose 2s to 34s 7fd to yield 3.6 per cent with a price-earnings ratio of 16.3. Clearly Beechams are not cheap, but it is impossible to find a good `growth' share on any cheaper basis. This confirms my view that the whole equity market is not yet attractive for the long-term investor, especially while Mr Callaghan continues to regard reflation as a non-starter.
I referred last week to Western Mining of
Australia as the greatest mining gamble of all time. It was 97s 6d as I wrote : 'it will shortly be topping 100s.' It has now bounded 25s to 125s on a fresh nickel discovery. Apparently it is likely to become the most fabulous nickel mine we have ever seen but at this stage no one can assess the real value of Western Mining.
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