4 MARCH 1960, Page 27

INVESTMENT NOTES

By CUSTOS riThE demoralisation of the gilt-edged market I is due entirely to the Treasury or the Bank of England, whichever has the last word. The government broker is sent into the market and tells the jobbers in circa that the Treasury is not willing to buy at the market price the stock the banks are selling to finance the rise in their advances. He quotes a buying price which is are point below the then quotation and down conies the market—fearful that tomorrow the govern- ment broker will walk into the Stock Exchange again and lower his buying price by another point. In these circumstances no one in his senses would want to buy a government stock for the moment. In these circumstances investment con- • Hence has been upset not only in bonds but in equity shares as well. It is not so much a question of the disparity of yields. The average yield on the Financial Times industrial share index is now just over 4 per cent, against 5.3 per cent. on old Consols and over 5i per cent. on others. The investor would be content to take 13- per cent. to 11 per cent. less on good equities if he were con- vinced that the Government is still anxious to allow the expansion of the economy to go for- ward. But until the Budget is tabled this question must remain open. So equity markets must remain dull and sensitive to bad news in spite of the excellent company reports which are now being published every week.

Good Company Reports If it were not for these excellent reports the equity markets would have suffered a severe slump instead of the modest 61 per cent. fall so far encountered. To take a brief look. First there was MONSANTO with net profits doubled and the dividend raised from 131 per cent. to 15 per cent.; then }MOVER with profits also doubled, the divi- dend raised from 60 per cent. to 90 per cent. and a one-for-one free scrip bonus; then UNILEVER with profits before tax increased by 23i per cent. and the dividend from the equivalent 14 per cent. to 22.7 per cent.; then JAGUAR with profits and dividend doubled; finally RUGBY PORTLAND CEMENT with net profits up 14 per cent. and a one-for-seven free scrip issue, but here the shares dropped be-

cause the dividend was unchanged. The test of the current low yields will come when the market can make up its mind as to whether the next annual reports will bring fresh profit records or reveal a turning-down.

Store Shares

One or two store shares are beginning to look cheap on the present decline. MONTAGUE BURTON produced wonderful results for the year to August last and since then have been enjoying, I hear, still better trade. At 46s. 3d. the `A' shares seem attractive to yield 4.3 per cent. on the 20 per cent. dividend last covered nearly twice. A higher dividend can reasonably be expected this year which would put these shares on a 5 per cent. yield basis or better. More speculative is GAMAGES, which has just reported a 7 per cent. rise in trading profits for the year ended in January and a jump in unearned hire-purchase profits of 40 per cent. The dividend is raised from 40 per cent. to 50 per cent. and the 10s. shares at 103s. 6d. yield 4.9 per cent. In view of the big office developments in the area of this Holborn store the current year's trading should be good.