Market Notes
By CUSTOS
Tate Stateof Emergency did not erupt in I Throgmorton Street. The stock market simply refused to go down. Of course, cuts in divi- dends and sharp declines in earnings affect indi- vidual shares, but the technical condition of a short supply of shares and a sustained institu- tional demand still persists. New issues are therefore eagerly snapped up. An interesting one this week was CRODINVEST, an investment com- pany holding shares solely in the CRODA ORGANI- SATION, a highly successful company in the chemical industry making lanolin and its deriva- tives. It is interesting to observe that the average price/earnings ratio of leading industrial shares in Throgmorton Street is now well over 15. This is now comparable with the price/earnings ratio of industrial shares in Wall Street after their recent sharp decline. Under normal conditions this would be regarded as a favourable oppor- tunity to switch from sterling to dollar equities, which undoubtedly have better growth pros- pects, but unfortunately the investment dollar
premium has risen to over 27 per cent, which makes switching impracticable.
It is significant that the investment trust market has held its recovery—and is, in fact, at a new peak for the year—in spite of the fact that investment trust income has been badly hit by the new taxation and that the companies, as far as their sterling holdings are concerned, must look forward to a slower rate of growth of revenue in the next year or two. The capital values of the underlying securities, however, remain high and those trusts with large dollar portfolios have now had a considerable capital accretion due to the high dollar premium. It is now rare to find investment trust stocks selling at a discount of more than 8 per cent, on the market value of their portfolios. Outstanding in a firm market has been ESTATE DUTIES INVEST- MENT TRUST, which is in the exceptional .position of having large holdings in private companies which eventually come to the market or are taken over by quoted companies. The shares are still cum the present bonus issue of one for seven, and at 91s. return a yield of 21 per cent. I notice that investment trust chairmen, in their recent annual statements, are becoming increas- ingly short-tempered, which reflects the difficult conditions under which the Government is now making them work. Said Mr George Touche, at the Guardian Investment Trust meeting: 'The
immediate outlook in this country is bleak. The economy is' in worse shape than it was in 1964. . . . The squeeze is on profits, which provide both the incentive for and the means of financing industrial expansion. . . . The logical end of present tendencies is an equality of penury, the "Groat Society."'
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