FINANCE-PUBLIC AND PRIVATE

THE BOOM IN RUBBER. SHARES

BY ARTHUR W. KIDDY.

.THE question of what actually constitutes a boom in a particular market is one which few would care to deter- mine. When a market is gradually recovering from a period of depression and low prices, the movement is generally described as a rally or a recovery. Persistence in the upward movement justifies the description of a "further rise" while, when the advance has got to a point which can be said to represent a level well over the average of a number of years, the market is usually described as "buoyant." It is somewhere at about this -.stage that the transition period of buoyancy to boom may be said to occur, but even then the word is not necessarily used in a sense of derision or criticism, -which • is generally reserved for a still later stage when the boom degenerates into a wild gamble. When, however, the word "boom" is applied to a market, there is one impression at all events which is generally conveyed, namely, that the movement has passed the stage when the rise owes its impetus merely to professional operators on the Stock Exchange, and that the public at large, both as investors and as speculators, is taking a hand in the movement.

•

PUBLIC INTEREST NTEREST EXCITED.

On those lines of definition, the present movement in rubber shares has undoubtedly taken on the aspect of a boom, for the interest in the market extends over a very wide area and, while the somewhat lurid descriptions of the Rubber Market in some of the modern daily journals as a " seething " or" struggling mass of humanity clam- ouring for shares" may be regarded as more picturesque than accurate, it is probably true that throughout the entire country speculative interest is concentrated at the present time upon the market for rubber shares. A boom, in fact, has commenced if it is not in full progress. Has the stage of the wild gamble also commenced, and, in a .word, is the market a highy dangerous one ? Subject .only to the understanding that it is as difficult to forecast the moment at which a boom degenerates into a gamble as it is to say when ordinary and healthy activity expands into a boom, I should be inclined to say that, carefully considered, the activity in rubber shares, even after the great rise which has occurred, can scarcely be described as a mere wild gamble, although the movement has undoubt- 'edly reached the stage where discrimination is needed. In the first place, however, the rise itself rests on a sound basis, and, inasmuch as there are probably a vast number of shares which still stand at a fairly attractive level, the market to the ordinary purchaser Might, perhaps, at the present time, be described as more risky than dangerous. And, like most risky things, it does not lack elements of attraction.

RECENT GAINS.

In the Spectator for July 18 I dealt at some length with the early stages of the rise in 'rubber shares and showed how the present movement, like so many Stock Exchange booms, had occurred in a department which at one time was the Cinderella of the Stock Exchange. For those, therefore, who may wish to note some of the factors responsible for the great rise in rubber itself during the early part of this year and the consequent stimulus given to the market: for rfibber shares, I would suggest a reference to the July issue. Since that article was written, however, there has been a further general advance in rubber shares, and in the following table will be found the shares of most of the companies quoted in the Spectator of July 18 (p. 115), comparison being made between the prices then given and the quotations at the _ _ . Lime ' of -writing. _ _ . _ . - - "MAD MONDAY:: -

. -

From the table it will be seen . that with only two exceptions prices are well above the quotations of mid-July and even in the two exceptions there is no decline to record. Briefly stated, it may be said that somewhere about the *middle. of July the rise in rubber shares 'cul- minated for the moment owing to the boom character of

Nominal Value, - •

ft Anglo-Dutch . .

2/- Anglo-Java.. . .

£1 Bajoe-Kidoel . .

£1 Baths-Rata.. .

£1 Gula-Kalunapong . . £1 Highlands and Low lands ..

£1 Java United • - £1 Kuala Lumpur .. 2/- London. Asiatic .. El Malacca ..

£1 Rubber PI- Trust..

2/- Sumatra Para • • £1 Tandjong £1 Tanjong Malin' .. II Telogoredjo..

2/- United Serdang • • £1 United Sua Betong 2/- United Sumatra .. 1925

Lowe it 46/6 2:9 41/3 19./0 413

32:6

36;6 34/0 35;74 3/41 35/71 32/9 3/11 33/9 20/0. 45/6 3/91 66/3 2/11 Price July 16th,

1925 • • 58;4 • • 5/7 • • 58/9 • • 32/6 • • 6/6

• • 43;1

51;3 37/6 73/9 5/6 66/10 46/9 5/6 57/6 32/6 80/0 6/3 90/0 5/0

TA-send Price

.. 59,0 744 .. 70;0 45/0 .. 8, 0 .. 46, 3 - 51,..3xd

.. 6/1

76/3

• •

• • 48;0 6, 3

• •

• • '72/6 400

• •

88/-

• •

6/7

• •

• • 105/0

• 5/0

2/- Bertam Cons. . .

_Highest

60/9 79 70/0 45/0 ..

8/104..

47/9 ..

55/71 .. / 96;3 ..

8/3 ..

77/6 ..

48/41 ..

6/3 ..

73/9 ..

41;3 ..

88/11 .- 0/71 ..

105/74 .. 5/74 ..

the markets having attracted a good deal of inferior buying, and on one particular day in July which has now come to be known as "Mad Monday," shares were bought in the indiscriminate fashion which usually marks the climax for the time being of the upward movement. About this time came news of some slight modifications with regard to the restriction of the output of rubber within the Empire and a rush to secure profits occasioned a very general setback, the spot price for rubber itself giving way from nearly 5s. to about 3s. 6d. But, while the new and weaker buyers of rubber shares were eagerly taking profits, those who had followed the rubber movement mdst care- fully, and in particular had kept note of the manner in which the rubber companies were making forward sales at satisfactory prices, refused to part with their shares, believing that the upward movement was well founded and that the setback would be of comparatively brief duration. That this view was justified is shown in the table given above and, speaking generally, it may be said that throughout the movement the buying has been of a stronger character than the selling.

A PAR VIEW.

Taking a long view, it is recognized that as against the possible exceptional character of demands for rubber during the past year or two in connexion with the motor industry must be set the depression in trade as a whole and, therefore,- with the growing use for rubber for so many purposes, the disposition is to expect a steady maintenance of consumption. Production, on the other hand, for some time to come, seems unlikely to do more than keep pace with the requirements of the consumer, and, inasmuch as many of the leading companies are selling their output for a year or more ahead at prices ranging around 2s. 6d. (whereas a good profit is shown nowadays at about is. 6d.) it is scarcely surprising that the better-class rubber shares should still be well held and that there should be an enquiry for the newer concerns where it is demonstrated-that rubber is in bearing and that the companies are not over capitalized. In other words, the belief prevails that activity in rubber shares has come to stay.

A TEN YEARS' RECORD.

Nevertheless, existing holders and intending purchasers will do well to remember not only that there is always a limit to movements in Stock Exchange prices in either direction, but that in markets of a semi-speculative character the oscillations are considerable and that at times when excitement is becoming pronounced it is often well to take profits, even if shares are acquired later at a lower level. It is not surprising, therefore, that during the past week,.. while general, activity in dealings has tended to increase, there has also been a disposition to secure profits. It would require someone with a Much greater knowledge of the affairs of rubber companies than the present writer to determine whether or not the general level of prices at the present time is too high. It is just as well, however, at times when there seems to be no limit to the upward tendency of values, to note very carefully bow current quotations compare with the average level over a period of years. In the following table, therefore, the present quotations of the same companies' shares as those given in the first table are - compared With • the highest and lowest prices of the past ten years, while in the outer column the rise is sliciwri from the lowest.

1915-24- . .• Present Price: Rise from Lowest Highest Lowest • Anglo-Dutch' 58/0 .; -9/4 59k- .. 49/3 Anglo-Java 8/9 .. •0/41 .. .7/41 ' 7/---

Bajoe-Kidoel 79/41 16/10-

.. 53/2 Batu-Rata.. 51/3 5/9' 4W— . • 39/3 Bertam Cons. .. 10/6 .. 2/7 .. 8/— .. 5/5 Gula Kalumpong .. 48/9 14/0 .. 46/3 .. 32/3 Highlands and Lowlands 65/6 • • 21/7 .. 51/3xd 29/8 Java United .. .. 49/6 .. • 4/0 .. 46/3 .. 42/3 Kuala Lumpur .. • .. 115/0 .. 23/9 .. 96/3 .. 72/6 London Asiatic' 11/41 • • 2/3 .. 6/1 .. 3/10 Malacca .. .. 145/0 . • 23/1 .. 76/3 .. 53/2 Rubber P.I. Trust .. 48/6 • • 7/6 48/— 40/6 Sumatra Para' .. 12/9 • . 1/9 .. 6/3 4/6

Tandjong4 .. 140/0 • . 18/6 ..

72/6

5432/19 Tanjong Malim 46/3 .. 7/3 40/—

Telogoredjo .. 82/6 • • 5/0 .. 88/—

8t7 United Serdang5 .. 17/0 • • 2/0 ..

6/7

United Sun Betong" .. 118/9 • • 35/3 .. 105/— 69/9

United Sumatra7 10/71 .. 1/4 .. 5/— • •

3/8 '1920: Bonus, 1 new share for 2 shares held.

'1919: Bonus, 3 new shares for 5 shares held.

'1920: Bonus, 1 new share for 2 shares held.

'1920: Bonus, 2 new shares for 3 shares held.

'1920: Bonus, 1 new share for each share held.

'Highest and lowest prices for nine years.

'1920: Bonus, 5 new shares for 6 shares held. -

It is impossible to glance at this record of prices without being struck by the huge gains which have occurred from the lowest quotations reached during the ten years. The moment, in fact, has arrived not necessarily for effecting wholesale realizations or for turning away from new ventures, but for the utmost caution and discrimination.