FINANCE—PUBLIC & PRIVATE
[By OUR CITY EDITOR.] STOCK EXCHANGE UNCERTAINTIES, [To the Editor of the SPECTATOR.] SIR,—Since I last commented in your columns, some three weeks ago, upon general market conditions there has been a general, but slight, sagging tendency in prices. More- over, during the last few days this tendency has been rather pronounced, some nervousness being occasioned by the further severe slump in some of the Continental currencies. The German mark, for example, during the past week has established a fresh low record of 740,000 to the £, and while German currency has now become so nominal, when expressed in terms of exchange, as to make the quotation almost meaningless, the slump is rightly felt to be a reflection of the serious conditions resulting from the Reparation crisis, and denotes indeed an abso- lutely impossible situation, whether regarded from the poli- tical or from the financial standpoint. If, therefore, I were asked to explain the present check to activity in Stock Exchange securities and the somewhat duller tendency, I should assign two main causes. One of them would be the renewed anxiety concerning European politics and the other the flood of new issues of capital.
As regards the first of these influences, the position can be very briefly summarized. Hitherto the effect of anxiety concerning European developments has been to some extent offset by the fact that this same anxiety has led to the remittance of large amounts of foreign money here for employment in one form or another. There is, however, a limit to such movements, and at the moment it is difficult to determine what would be the effect upon markets on the one hand if a real improvement in Euro- pean affairs were to take place, and on the other hand if the continued deadlock were to result in some kind of financial or political catastrophe at the centres chiefly affected. In the latter case it is conceivable that real financial loss and liquidation might take the place of the previous investments of foreign money prompted by anxieties. If, on the other hand, the German Note were to form the basis, first for discussion, and later for a real settlement of the Reparation problem, a great step would have been taken in the direction of promoting international peace and international trading. Under such circum- stances, however, while securities might respond for the moment to what would undoubtedly be a welcome de- velopment, it is possible that expectations of dearer money following a trade revival would lead to realizations in the investment markets. Uncertainty on this point, therefore, restrains activity in securities at the moment, and the more so because recognition has to be made of the great advance which has already taken place in many departments of the Stock Exchange, and especially in the gilt-edged section. A further cause, however, which may well explain any temporary dulness in markets is to be found in the great number of capital flotations during recent months and- especially during recent weeks. Within the last month alone these flotations must have reached a total of over £50,000,000 (the Indian, Austrian and Dutch East Indies loans themselves accounting for about £40,000,000). And, be it remembered, that although the loans have been floated, most of the instalments have still to be met. Making all allowance, therefore, for the volume of money awaiting employment owing to the comparative stagna- tion of international trade, it seems improbable that surplus resources can be accumulating at this pace, and it is not surprising that there should be some indications in the Stock Markets of slight indigestion. Moreover, the public is also aware that a great number of new and fairly attractive issues of capital have still to be made, and consequently there is a tendency to take up these new issues rather than to acquire existing stocks, espe- cially as there is uncertainty as to the extent to which some of these may be affected later by realizations on the part of those who must be regarded as holding specula- tively for an appreciation in values rather than as per- manent investors.
Having regard to all these circumstances and to the peculiar character of the influences operating, the really remarkable feature is that values should be so well main- tained, for the set-back has, after all, been quite moderate. Uncertainty, in fact, rather than active mistrust best characterizes the attitude of the more professional operators in securities at the moment, and in not a few directions the disposition is to anticipate rather stagnant markets for some little time to come. Indeed, some are backing their views in this respect by taking unusually early some part of their summer vacation, notwithstand- ing the unseasonable weather.—I am, Sir, yours faithfully,
Previous page
