FINANCE AND INVESTMENT
Kicking their heels and waiting for an autumn business rally which may still be many weeks off, if indeed it comes at all, market men have been left to their thoughts. It has not been a cheerful occupation, nor have the thoughts been pleasant. This rush to buy gold has not dried _up with the Russo-Japanese armistice. Is it really fears of Hitler that are behind it ? Or new fears for the safety of the franc ? Both undoubtedly, and distrust of sterling too, for the visible trade balance is moving against us once again, while the Berlin Bourse is experiencing an ugly slump. The dollar has been appreciating rapidly meanwhile, which seems to suggest that the pound sterling is in process of finding a new level, and fugitive money a new home. This autumn trade recovery—is it such a good bet after all ? The latest indi- cations of British trade progress are not inspiring, but American statistics still give us reasonable grounds for hope. Wall Street is not so steady as of late and commodity prices have been weakening here and there. Gold shares persistently refuse to reflect the activity of the bullion market. Who but the foolhardy would operate at such a time ? I should not for a moment suggest that either the speculator or the enterprising investor should give his enterprise much scope in these conditions, but I do not feel that the prospects of a moderate improvement later this year have been altered one way or the other during the past week. The most one can expect from markets this month is that they should avoid any substantial fall and they are fulfilling that hope so far.
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BETTER AMERICAN FIGURES
Some of the current American business statistics are by no means discouraging. The rubber and copper consumption figures issued on Saturday for instance show definite signs of a higher, if still inadequate, level of industrial activity. Rubber consumption in the U.S.A. in June advanced by 1,58o tons to 32,209 tons. It has been advancing steadily for three months now, whereas a year ago the fall from over 5o;000 tons a month to the low point of under 24,00n tons reached in February had already started. Meanwhile stocks have been substantially reduced„though at 284,914 tons they are still more than ample. The copper figures make an equally good showing. Apparent consumption, which means delivery into consumers' works -.and private warehouses, rose in July by 8,386 tons to 41,249 tons in the US.A., and by 14,003 tons to 126,533 tons in the rest of the world. World stocks of copper meanwhile declined by 46,006 tons, of which the U.S.A. accounted for 23,293 tons and the rest of the world for 16,713 tons.
BRITISH TRADE RETURNS
Those who are still in doubt about the reasons for the fall in sterling and the strength of the American dollar would cici well to spare a minute to study our oversea trade returns fOr July. Not only do they show no sign of revival in the main export categories, but they indicate that,despite the decline in the total volume of merchandise trade, the adverse balance is still excessive. It amounted to £31,913,729 in July as against 41,106,o57 in July last year. The total adverse balance for the seven months ended July was £235,153,356; an increase of £12,403,658 over . the same period of .1937. Exports of British produce were £37,469,969—a decline of over ito,000,000 compared with the same month last year. Moreover, all the country's main export industries suffered heavily: Cotton piece-goods have given place to machinery as the largest British export ; iron and steel products are heavily down. Coal exports- are down in volume though the rise in prices has partly concealed the decline. .
Perhaps -it is- wrong to lay much emphasis on the failure of British exportS to yet recover their volume. That would be one of the last visible signs of increased industrial activity arid what we now see only confirms what we already knew, namely, that there has been a sharp recession. The first sign of recovery should be an increase in the supplies of raw materials imported - for our manufacturing- industries. That tendency is also difficult to'finct for the fall in com- modity prices masks the true position, but a close examination reveals some hopeful signs. The volume of -wool imports, as opposed to value, shows an increase both in the single month of ,July and over the seven months' stretch. Raw cotton imports, which were heavily down in the early months. of the year, have now begun to rally, and for the month of July showed an advance over July, 1937. Aluminium imports have also risen. The argument cannot be pressed further. Imports of several other important raw materials are down. In total value the raw material imports have shrunk faster than either foodstuffs or .manufactures but it is encouraging to find that there are industries willing to replenish their stocks. * * * *
BEECHAMS PILLS' NEW MOVE
Mr. Philip Hill, the chairman of Beechams Pills, seems to be carrying off the laurels for enterprising finance this year. At the annual meeting in May he disclosed that he was con- sidering ways and means of rearranging the capital so as to bring the shares within the means of the enormous number of customers and potential customers of the company's pro- ducts. The 5s. deferred shares were then standing at over 5os. and Mr. Hill explained that he would hie to have a unit with a market value of about 5s. Since then he has carried off with great credit to himself and handsome benefit to the company the merger with Macleans. Now he returns to the share-splitting problem. It is proposed to capitalise £600,000 from reserve and so distribute a share bonus of 200 per cent., after which the 5s. shares will each be subdivided into two shares of 2S. 6d. each, so that for each 5s share now held the deferred shareholder will have 6 shares of 25. 6d. each. The present market value of the 5s. shares is 57s., so that pre- sumably in the new form the 2s. 6d. shares will stand at around 9s. 6d. Mr. Hill has not achieved his 5s. market unit yet but he is well on the way. Moreover, his plans are not yet complete. To finish the financing of the deal with Macleans the company will issue a further 2,400,000 deferred shares of 2S. 6d. each this autumn at a price not yet fixed, and all classes of shareholders will be given preferential-con- sideration on allotment. In view of the prospective benefit of £120,000 per annum arising out of the Macleans' transac- tion Beechams deferred still look attractive.
* * * * _ _ Venturers' Corner
For the Venturers this week I suggest two gold mines, not because mining shares can remain steady if the market's worst political fears are realised. On that hypothesis all investments are equally bad. But so long as those fears remain with us, the exceptional demand for gold is -likely to continue ; the price of gold- is likely to remain high, and gbld mines in due course should profit. Among dividend- paying mines I rather fancy the 2s. shares of Luipaards Vlei Estate and Gold Mining Company at around 19s. od. The company has an excellent dividend record, having paid so per cent. in each of the last two -years and as far as one can foresee has a long life before it.. The company has recently embarked upon a large scale expansion and development programme with a view to crushing larger amounts of ore and for this purpose has issued 1,415,649 additional shares at 2S. per share. If the hopes which have inspired this programme should be realised, the potentialities of the company_ would be very great. Among; the developing, propositionk ivhiCh hale riot yet reached the. dividend stage .Marievale- Consolidated Mines, whose los. Ordinary shares stand at around as. 9d., seem worth looking at. The company is in the Union Corporation group and has an issued capital of £1,652,083. One vertical and two incline shafts are being sunk and boring has indicated that the reef underlies the property at a depth of 400 to 3,200 feet. There has been some good buying in the market recently, although no very striking gold' values have yet been found.
(Financial Notes, see pages-320.)
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