Market report
CUSTOS
The market in equity shares reflects more and more strongly a widespread lack of confidence in money values. The Financial Times index is within 10 points, or 2 per cent, of its peak. Marked down 5 paints on the railway go-slow, the index recovered within a day. Few dare get out of equities and into cash; and fixed-interest stocks are friendless.
All this is underlined by the terms of Rolls- Royce's long-awaited borrowing operation. Rolls is asking the market for £31 million, two- thirds of it by means of a one-for-six rights issue, and the rest by an 13f per cent debenture. This is an unheard-of rate of interest for a com- pany of Rolls-Royce's standing. A debenture ranks first among a company's borrowings, and therefore commands a finer rate than prefer- ence or loan stock. Heaven knows what Rolls would have been asked to pay on a straight- forward loan, or what lesser companies would find themselves charged. Rates such as these serve to make the raising of equity capital a practical proposition again : hence the large rights element in Rolls' operation. Not that these rights, at less than a shilling a share, look especially attractive.
Another sign of the times is pointed by Cater, Ryder's report and accounts. This dis- count house makes up its books at the end of May. Two years ago it startled the market by showing that its holdings of gilt-edged stock were no more than a quarter of the previous year's figure : this proved to show good timing, for in the summer of 1966 the gilt-edged market collapsed. Now Cater's show £31 million of gilt- edged, as against last year's figure of £55 million. Sir John Musker, the chairman, draws attention to the growth of Cater's activities in the 'parallel' money markets, and to its 20 per cent stake in Martin Corporation, merchant bankers in Sydney And Melbourne.
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