FINANCE AND INVESTMENT
By CUSTOS .
ONCE again those investors—and they are the vast majority—who have refused to be panicked out of good stocks by the crisis over Berlin are being vindicated by the course of prices. What is most impressive about the recent behaviour of markets is their extraordin- ary stability and their underlying strength. Before the Berlin crisis reached the headlines the Financial Times index number of industrial ordinary shares stood at 116.7. On the gloomiest days in September it never fell below 15.1—a drop of less than r1 per cent.—and it has now moved over 117. In the same testing period gilt-edged have actually advanced, in some cases quite sharply, to the highest points for several months. I admit that markets are " thin" in the sense that the volume of dealings is so small that price movements may flatter the weight of buying or selling, but there is no disputing the dogged mood of investors.
GILT-EDGED AND EQUITIES For the outstanding strength of gilt-edged there are several explanations. First, and most important, the bulk of the funds accumulating for investment are in the hands of Government departments, insurance companies and other institutions which automatically invest mainly in fixed - interest stocks. Another influence helpful to gilt-edged has undoubtedly been the fairly general conviction that at current prices most of the leading indus- trial equities are fully valued. There is plenty of evidence that many private investors with funds available have latterly decided that discretion is the better part of valour and confined their purchases to the fixed-interest groups. In other words, few people have been willing to act on the view that inflation is on the way again or, even if it were, that it would bring much grist to the equity share mill. I think this caution is fully justified.
MORRIS-AUSTIN ARRANGEMENT Rationalisation in the motor trade is an objective approved not only by the Government but by the majority of motor shareholders. There will certainly be widespread approval of the arrangements for technical co-operation announced by the Nuffield group and the Austin company. Although the emphasis is on exchange of inform- ation, the possibilities arising out of "pooling of factory resources" have not been lost on the market, and the prices of both Morris Motors and Austin ordinary shares have been raised to reflect the expectation of substantial reductions in production costs. How far the new arrangements will go is not yet clear, but it seems safe to assume that the realisation of the major aim of reducing costs to meet foreign competition will lead to some standardisation of models and agreements to apportion the export field. Whether the directors have in mind a financial merger only time will show, but it will be surprising if some pooling of financial interests does not follow at a later stage. Meantime, the ordinary shares of the two com- panies should not be sold. The returns of around 51 per cent. are a fair reward for the risks.
SHIPPING SHARE YIELD
The announcement that the Advisory Committee contemplated under the Transport Act is to be set up to consider the problem of coastwise transport rates should be of some benefit to the Coast Lines Company. As things stand, exceptional rates quoted by the railways introduce an artificial element into the coastwise transport situation, and there can be little doubt that the Advisory Committee will suggest some more rational measures. Meantime the ki Ordinary stock units of Coast Lines, now quoted around as. 9d., look good value for money. In each of the past four years this company has paid a 5 per cent. dividend which has been covered by a very large margin of earnings. Available net profits in the years 1944 to 1947 have averaged over 15 per cent., enabling the company to put substantial sums to reserves. The balance-sheet position is strong and in the more favourable market atmosphere in the early months of the year the shares stood over 22S. At their present level, yielding about 51 per cent., they are a promising shipping investment.
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