12 SEPTEMBER 1941, Page 22

FINANCE AND INVESTMENT

By CUSTOS

THROGMORTON STREET presents an odd study in contrasts. At one end of the Stock Exchange there is a boomlet in gilt-edged; at the other speculative enterprise has fastened on depressed foreign bonds and rail stocks, more particularly in the South American field, and the shares of developing gold mines. Lead- ing home industrial ordinary shares are firm but inactive, so that for the moment it is not so much a case of investment funds being switched from equities into gilt-edged as of speculative sentiment having veered away from seasoned dividend-payers to depressed securities with a chance of capital appreciation. This is not a surprising development after the recent improvement is front-rank industrials which has narrowed the yield gap between equities and gilt-edged. Nor is it difficult to understand why many investors are seeking capital appreciation rather than income yield at a time when taxation whittles down yields by 50 per cent, or more.

So far the speculative buying has been pretty discriminating Thanks to the war, South America is now finding a reasonabls satisfactory outlet for her products. That implies a measure of business prosperity—already apparent in recovering railway traffics—and, of course, a strengthening of the Budget position. Here we have a basis for purchases of South American railway securities and Government bonds at the rubbish prices to which they had fallen. In the home field speculation is still dominated by post-war recovery prospects. In some groups, such as build- ing shares, current quotations seem to me to discount earnings and dividend chances a long way ahead.

GILT-EDGED PROSPECTS In a highly specialised speculative movement of this kind there is not the slightest trace of a flight into equities as such, and for this reason it constitutes no threat to the gilt-edged market. In fact, as the course of prices bears out, the tide is still flowing strongly in the Government's favour. Weight of investment funds has carried gilt-edged prices to new five-year peaks—the 34 per cent. War Loan is only 24 points below the record established in 1936 and even the two War Bond issues are now floating comfortably at a worth-while premium over pat All this may be preliminary to the Treasury's next big financing operation—it probably is—but I see no reason why interest rates should not be screwed down a little further yet. The Treasury holds the trump cards and is playing its hand shrewdly.

HUDSON'S BAY POSITION

There was no storm, after all, at the Hudson's Bay meeting. Mr. Nordon duly registered his criticisms of the board, but they were more in the nature of a formal protest than a real attack. Whatever may have been the board's shortcomings in the past, the new regime under Mr. Patrick Ashley Cooper has brought a great improvement. The financial position is much stronger, and the earning power is there whenever trading conditions allow. This year's prospects, it seems, are not very bright, II the group's business must suffer, at least in some sections, 113 Canada cuts down its semi-luxury spending.

TELEPHONE RENTALS PROGRESS

For the fifth successive year Telephone Rentals is paying I to per cent. dividend. Net profits, before tax, reached a new peak for the year to May 31 at £136,312, and earnings on th! 5s. shares, after allowing for tax, were the equivalent of over 17 per cent. General reserve received £25,000, which brings a up to £225,000, apart from a capital reserve of £95,706. Fran Mr. F. T. Jackson's review at the meeting it is evident that coso are rising, but he is cautiously hopeful about prospects. The Is. shares, at 8s. 6d., yield 6 per cent. They are egood holding.

ENGINEERS' RECORD TURNOVER Last year Barton and Sons, who control a group of light engineering companies, established new records of output and profits. The ordinary dividend was held at 5 per cent., be taxation has taken a heavy toll. Mr. J. E. Hodgkin explained it the meeting that all the works were fully occupied, but reminded shareholders of the taxation position. For the first six months of the current year turnover was again increased, but dividehd prospects need to be viewed in relation to E.P.T. The 5s. shard yield 10 per cent. at 2s. 6d., but are a speculative holding.

WELLMAN SMITH OWEN

A recovery trend apparent three years before the outbreakri war has been accentuated in the case of the Wellman Sind Owen Engineering Corporation. For the year to March 31 trading profits were only just below the peak established in the preceding year and the ordinary dividend has been held at 1 per cent., plus a 24 per cent, cash bonus, Sir Samuel Robea in his survey at the meeting, takes a hopeful view of post4 prospects, as this group is primarily engaged on the construe' tional side. At 21s. the £t ordinary shares yield over n cent.