COMPANY NOTES
By CUSTOS medium-to-long loans in the capital mar- ket. It has even been borrowing 'short' to THE market in industrial equity shares, after its recovery, has become irregular and busi- ness is drying up on the approach of the Easter holiday and the first 'big' Budget of Mr. Macmillan. A feature has been the sharp recovery in ASSOCIATED ELECTRICAL INDUSTRIES, which had been depressed by the new issue. When dealings opened in the new shares (issued at 57s. 6d.) the premium was only 31d. It is now 5s. and the short- term speculator will no doubt be taking his profit. The long-term investor should hold. The gilt-edged market is strengthening in anticipation of the Budget, for the tougher the Chancellor is the better it will he for Government stocks. The Treasury has a particular interest in seeing gilt-edged prices higher before August, when it has to fund the maturing £824 million of 21 per cent. National War Bonds. Some optimists even believe that Bank "rate will be reduced be- fore that important date, but that surely depends on the balance of payments. Look- ing ahead, there are still many 'shorts' on an attractive yield basis which should tempt money to leave its deposit funk-holes. Investors would be wise to prepare to jump from deposits into the gilt-edged market on any encouragement from the Chancellor.
* * * Insurance companies enjoyed a very profitable year in 1955 and many distribu- tions will be increased in this dividend season. The two big industrial companies have already announced their increases: PEARL can now be bought on a 5.35 per cent. yield basis and PRUDENTIAL, on a 4.85 per cent. basis. These are heavy shares, which are not suitable for the small investor, but I would draw his attention to ROYAL and COMMERCIAL, which have both increased their interim dividends and should also raise their finals. At the moment Commer- cial Union is giving the higher yield of 4-1 per cent. at 83s. assuming that the total distribution is increased to 3s. 9d. per share. Royal at 81s. 3d. would give £4 5s. 9d. per cent. if the total is increased to 3s: 6d. per share. It is not often that the `blue chips' in the insurance market offer such attrac- tive yields.
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Those who believe that it is now only a matter of time before the West is trading more freely with the Communist East might take an interest in the Eastern trading banks. As the chairman of the Hongkong and Shanghai Banking Corporation said re- cently in his annual statement, all British merchants and bankers engaged in the China trade will welcome the day when the embargo is removed, but as total abolition is not yet practical politics they are pressing for the reduction in the China embargo list to make it similar to the Russian list. Mean- while they are adapting themselves to the new trading conditions in the rapidly de- veloping countries of Asia. The CHARTERED BANK OF INDIA, AUSTRALIA AND CHINA IS re- vising its charter to that end and having lost its branches in China (on the national- isation of banking by the Government) is opening up branches in other Asian coun- tries. A feature of its new business, it says, is the increasing finance of infant industries and public works which involve longer credits. A new corporation has therefore been formed to develop this line. Last year's profits were slightly up and the dividend was maintained at 15 per cent. The excep- tionally high yield of 81 per cent. can he obtained from the Chartered Bank shares at the current price of around 35s. An even higher yield can be secured from MERCAN- TILE BANK OF INDIA 'A' shares of £5 (£21 paid) at over 80s. This compares with only 5.35 per cent, from the stronger tioNoKoNc. AND SHANGHAI BANKING CORPORATION, which is maintaining its dividend on capital in- creased by last year's bonus. Care should be taken in dealing in these Eastern banks because the market is extremely narrow and the jobbers quote very wide prices. But I would sooner invest in these shares, how- ever speculative, than gamble in the pre- revolution Russian bonds.
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