FINANCE—PUBLIC & PRIVATE.
[By OUR CITY EDITOR.]
MARKET PROSPECTS.
[To the Editor of the SPECTATOR.] SIR,—The firmness of the Stock Markets has been main- tained right up to the eve of the Easter holidays, cheerful- ness and activity being displayed both as regards existing Securities and as regards new capital issues. I mentioned a week ago the likelihood of the 4i per cent. Treasury Bonds being replaced by an issue of 4 per cents., and on Saturday last the definite announcement was made of such an issue of £15,000,000 in 4 per cents. at 94f—the price giving a flat yield of just under 4f per cent., or allowing for redemption at par ten years hence, a yield of about £4 14s. per cent. No better evidence, both of the general volume of resources awaiting investment and also the cosmopolitan character of the demand, could have been afforded than by the fact that despite the pending holiday season the issue was more than twice covered by the public, while an issue by "Johnnie Walker" for about 3- millions of capital was also greatly over-subscribed.
As regards existing securities the tone was also well maintained, and the following short list of gilt-edged, Home Rails and one or two Industrials and speculative descriptions taken almost at random shows that even following, on the rise of last year there has been a further improvement :— Present
Jan. 1. Price.
Consols .. 551 .. 591 3f per cent. Conversion Loan .. 75 .. 77)1 5 per cent. War Loan .. 100f .. 101/ India 3 per cent. .. 55 .. 58 Gt. Western Ordinary .. .. .. 109 .. 113f London and North-Ristern defd.
Ordinary .. .. .. .. 31 36f London Midland and Scottish .. .. 103 113 Southern " A " .. . . ,. .. . 33 39 Brunner Mend .. • • • • 88s. Od. .. 41s.
Imperial Tobacco 73s. .. 79s.
Harrods Stores .. 28s. .. 348.
Anglo-Dutch Rubber • • 348. . 3Ss. Bukit Rajah .. 1 I A- Linggi • . it De Beers Mines .. .. 1311 .. 14 Rio Tinto Copper .. 331 .. 361 Translating the appreciation since the beginning of the year into terms of cash, it may be noted that the list of 865 representative securities selected by the Bankers' Magazine shows an aggregate appreciation for the three months ending the 19th instant of about £350,000,000, of which 2294,000,000 was in fixed interest stocks and £56,000,000 in variable dividend securities.
The question now uppermost in the minds of Stock Exchange speculators and investors alike is concerned with after Easter" prospects. Has the apex of the upward movement in gilt-edged securities been reached ? And what are the prospects of activities spreading in the Industrial and more speculative groups ?
It would not be difficult to make out a good case for a further general rise in securities. As already indicated, the general public is inclined to respond to new capital issues and to purchase existing securities for a further advance. Monetary conditions remain easy; the National Accounts show a good position; the Budget, even if it disappoints the hopes of the Income-tax payer, is scarcely likely to be a dismal statement; following the close of the Government's fiscal year comfortable conditions usually characterize the Money Market and two months hence there will be the disbursement of over £50,000,000 in War Loan dividends, anticipation of the re-investment of a portion of which usually stimulates markets in advance. Finally, there is at least the hope of a sufficient revival in trade to encourage optimism amongst holders of Industrial shares without involving sufficient monetary stringency, to exert an adverse effect upon the Stock Markets generally.
-On the whole, 1 am inclined to think that, so far as Industrials and, the more speculative markets are concerned, the chances favour the extension of activity, (Continued on page while as regards British Funds and the purely gilt- edged descriptions I think that there are some qualifications which should now be borne in mind. To justify a further advance in that direction we must be . able to rely upon such conditions of monetary ease as can only be associated with stagnant trade for a very long period ahead, and demands for capital must not be excessive in character. A moderately optimistic view of the situation as a whole, however, requires that there should be expectations of improved political conditions in Europe ; a revival in international trade, and, as a consequence, large demands for capital with an almost inevitable hardening of money rates. Those are factors which might not have any injurious effect upon Industrial issues in the immediate future but might conceivably. restrain a further advance in gilt-edged descriptions.
Moreover, as regards monetary prospects a cloud, no bigger, perhaps, than a man's hand, has already appeared in the sky in the shape of uncertainty concerning interest rates in America. At the time of writing an important Conference is proceeding in Washington between the Federal Reserve Bank Governors and the Central Federal Reserve Board concerning the question of monetary policy in the States. On the one hand, certain of the commercial and agricultural interests are antagonistic to any advance in money rates, and so far as the, general position of Reserves is concerned there would seem to be little need for caution. On the other hand, the banking authorities see, both in the rise in tommodity prices and large Wall Street speculative activities, the results of inflation and deem a corrective policy to be necessary. Moreover, it is probably not forgotten by the Federal Reserve Board that some three years ago they were twitted with not having raised their rate in time to arrest the rise in commodities and the speculation in stocks. If, before my next letter appears, it has been decided to raise the Rediscount rate in America to 5 per cent., I think that not a few will regard it as indicating the likelihood of a slight hardening of money rates here. I am rather inclined to think that the step may not be taken at once, but the possibility should not be ignored,—I am, Sir, yours faithfully,
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