28 JUNE 1940, Page 22



ONCE again the Treasury has launched a large-scale borrowing operation with remarkably little fuss. In a happier environ- ment I should have expected another issue of a specified amount with the subscription lists open only for a few days, but market conditions are now so untrustworthy that the authori- ties have wisely fallen back on the " tap bond" method of continuous borrowing. In relation to current prices the terms of the new 2+ per cent. National War Bonds are just right. A 21 per cent. seven-year bond at par is a good purchase for the private investor ; it is an ideal holding for the banks and insurance companies to whom the short date will make a powerful appeal. Already the Prudential Assurance has given the new loan a flying start with an application for £20,000,000, a clear indication of the ample resources now available for this purpose. With large commitments maturing—the k oo,000,000 balance of the 4.1 per cent. Conversion Loan is due for repay- ment on July 1st—the Treasury is banking on a really sub- stantial response. It will not be surprising if the first week sees Li oo,000,000 left well behind.


Even gilt-edged have wilted a little this week in face of the chilling blasts from across the Channel, but the falls in this group look trifling in comparison with the landslide in industrial ordinary shares. Within a few days and without any heavy selling pressure hundreds of millions, of pounds have been knocked off the value of British industrial equities. The main cause of this dismal performance has been the sudden—and obviously very belated—recognition of the war damage risk. Unfortunately, the risk itself is quite unassessable so that it provides plenty of scope for the most hair-raising estimates. Markets are thin, there are few bargain-hunting buyers about, and with jobbers in their present gloomy mood even the suggestion of bad news or attempts to sell bring wholly dis- proportionate falls in prices.

I agree that ordinary share prices are of less moment today than in normal times, since the Government wants all our surplus savings to go into gilt-edged stocks. There is a real danger, all the same, that the stability of the investment front as a whole might be endangered if nothing is done to stop the rot in equities. Just how this can be achieved nobody seems to know. Obviously, minimum prices will not do the trick. It is no use fixing a minimum price of, say, £2 for a Lr ordinary share paying 15 per cent. today but which passes its dividend next week. That is merely to invite a general freezing up of dealings followed by a " black " market later. I suggest that, as a start, (t) the Treasury should indicate to the insurance companies and investment trusts that modest pur- chases of equities would not be frowned on • (2) that investors should refuse to be panicked into selling good shares through false rumours or stupid fears; and (3) that the banks should help by easing the strain on any uncovered loan positions.

SHELL DIVIDEND SHOCK Boards of directors have also a part to play in avoiding jittery, as distinct from merely cautious, dividend decisions. Until the full figures are available I reserve judgement on the passing of the Shell final dividend, but this bombshell has certainly been responsible for spreading a good deal of bewilderment among investors. Everybody realises that with its large Continental interests the Shell group has suffered heavy war damage, but it is also known that the company has built up huge reserves. As I have said, I withhold judgement unjil we are told what the war has actually meant in terms of reduced earnings and destruction of assets.

ZINC CORPORATION Viscount Home's review at the Zinc Corporation meeting dealt mainly with the effects of war on the company's business. The board's policy has three objectives—to aid the war effort, to avoid war profits, and to maintain the fullest possible employ- ment. Developments at Broken Hill are still giving excellent results, and the Corporation's various other interests, such as New Broken Hill Consolidated, are making good progress._