20 MARCH 1942, Page 22



WHAT with sombre war news and the steady movement towards " fortress economics " at home, markets are doing well enough in holding their ground. So far as new buying is concerned, gilt-edged stocks are now meeting the full-scale competition of warships weeks, and there are obvious restraints, including the near approach of the Budget, on enterprise in the speculative groups. On the other hand, one cannot ignore, on the credit side, the immense technical strength of markets, and the upward pull implied by the constant growth of investible funds. Adjustments there must be to vicissitudes in earning power resulting from war developments, but I see no reason to look for any general downtrend in security prices.


One of this week's casualties in Throgmorton Street is Canadian Pacific common, which has fallen precipitately from Iii to to dollars. Understandably enough, the board's decision not to pay any dividend for 1941 has come as a shock to stockholders. They are mindful of their chairman's assurance a year ago that the board had not forgotten that the substantial ordinary capital had been without any return since 1931, and that this fact would be taken into account in deciding dividend policy. Now, in spite of a rise of over i0,000,0o0 dollars in the 1941 net railway earn- ings, and the continual upward trend of gross traffics, the board still refuses to loosen the purse-strings " because of war conditions."

Stockholders are told—what they have never doubted—that the increase in earnings during the past two years has been due almost entirely to war conditions. The decision to conserve resources is due partly to this fact, and partly to the necessity to meet maturing obligations and capital expenditure. In the long run, of course, the common stockholders may benefit from this policy, but I do not expect that argument to make much appeal to stockholders who have already waited eleven years. In my view, the C.P.R. board have acted ungenerously and unjustly in withholding a common dividend.


In quite a different category is the conservative policy, wholly justified in existing circumstances, adopted by the Eastern exchange banks. With a final of 7 per cent., the National Bank of India brings up its total dividend for 1941 to 14 per cent., against 16 per cent. for each of the three preceding years. A second interim of 3 per cent., which is also a final dividend, brings up the total distribution of the Mercantile Bank of India to 9 per cent. This compares with the 12 per cent. rate regularly paid since 1932. Profits for 1941 are not yet disclosed, but it Is obvious that all the Eastern exchange banks are now faced with a threat to earning power, to say bothing of any risk to thew assets position, which dictates a cautious distribution policy. Fortunately these institutions have built up strong reserves to meet emergencies. Shareholders may easily be called on m accept further reductions in dividends for the current year, but for those prepared to face up to the prospect of lower income I recommend a policy of seeing things through.


In spite of war handicaps, the full accounts of the Prudential Assurance Company for 1941 disclose many new records. Assets rose last year by £10,558,922 to £375,413,502, and total income was £594,712 above the 1940 level at £56,643,498. Of the invest- ment portfolio, as much as £125,000,000, or 33 per cent. of total assets, is now held in the form of British Government securities, in which this company has placed practically all its cash. In leis statement, the chairman, Sir George L. Barstow, announces that since September, 1939, the "Pru " has subscribed for more than £52,000,000 of War Loans. Subscription to London's WarsluP Week will be £io,000,000.