7 FEBRUARY 1936, Page 38

Financial Notes


UP to the time of writing, the Stock Markets are still showing considerable resistance to external influences such as those represented by disturbed conditions in Europe. Bankers have testified at recent meetings to the improvement in home trade and the prospect of its continuance. Govern- ment expenditure during the current year promises to stimulate certain industries and, at present, dealers in securities are centring upon the prospects of a further expansion in the home trade rather than on the dangers which lurk in the shape of foreign politics. Whether inattention to the latter factor will prove to be justified remains to be seen, but present conditions are not difficult to understand because hitherto those who have paid little heed to foreign affairs, and have expressed their confidence in home conditions by purchases of securities, have done quite well.

British Funds and kindred securities have suffered a little during the week by realisations, but Home Railways, Home Industrial shares, and, in the Speculative Markets, Oil shares have been quite active at higher prices. There has also been a certain amount of activity in those American shares which are dealt in on this slic of the Atlantic.


One of the factors responsible for an easier tone in gilt- edged securities has been the fairly large fresh capital creations and the knowledge that there are many more issues to come. The feature of the week, of course, has been the issue of £27,000,000 by the Railway Finance Corporation with principal and interest guaranteed by the British Government. The Loan, which was in the form of 2i per cents. at 97, has from 15 to 16 years to run, and, at the price of issue, what is known as the running yield is about £2 11s. 6d. per cent., or. allowing for redemption at par in 15 years time, the yield is nearer 21 per cent. Applications for the Loan were on a fairly large scale, the big applicants only receiving about 80 per cent. of the amount applied for. Nevertheless, the market, which has come to be a little sceptical with regard to the precise measure of success attending very large flotations, is inclined to the belief that some portion of the Loan may

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Financial Notes

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have been taken by Government Departments. Whether that is so or not, •I am unable to say, but dealings in the new issue, which opened at a small discount, changed very largely into buying orders later in the day on Monday, and the stock !closed at par. Nevertheless, the nlarket for gilt-edged stocks is now somewhat adversely affected by uncertainty whether there will be a big Government Loan to meet the expected outlays on Defence and: also by the knowledge that, in the near future, there is likely to be a number of fresh capital issues of the Trustee type largely on behalf of Home Corporations.

The knowledge of these impending issues would probably have less effect upon the market if there was a certainty that the issues would be made on terms likely to ensure a quick response from the investor. For some time past, however, prices of these issues have been cut so fine that the investor shows some disposition to go " on strike " so far as applying for the Loans are concerned, trusting rather to chances of picking them up in the market at a small discount.

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There has been a rise during the last week in the stock of Watney Combe Reid and Co., since the announcement was made of an increase in the interim dividend from 10 per cent. per annum to 12 per cent. per annum. A year ago, the interim dividend was followed by a final distribution at the rate of 18 per cent. per annum, making 14 per cent. and a bonus of 2 per cent. or 16 per cent. in all for the year. It may be noted that the interim dividend just announced is higher than any interim dividend since 1930-31, when 14 per cent. per annum was paid and the dis- tribution for the whole year was 19 per cent. In the interval, by reason no doubt of trade depression and the oppressive beer duty, the dividend was down to 10 per cent. for the year ending June 30th, 1933. The price of the stock now stands at about 81s. for the £1 units of stock, so that, even if the dividend were to rise to the 19 per cent. of five years ago, the yield would only be a little over 44- per cent.

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That well-managed company, the Gas Light and Coke Co., is again able to present a good report for the past year. The gross revenue rose from £11,949,000. to £12,237,000 and the net revenue from £2,026,000 to £2,071,000. During the year, the sale of gas showed an increase of 1 per cent. over that in the previous year with an additional 37,342 consumers. It is a great testimony both to the good management and enterprise of the Gas Company that, in spite of the increased Use of electricity, the demands for gas,' both in industrial undertakings and in private households, continue, to increase. The report of the Gas Light and Coke Co. states that, in addition to the increase in the number of consumers, 166,938 more appliances were sold and let out on hire last year than in the previous year, a circumstance which promises well for the current year's consumption. It may be noted that a Bill has been deposited in Parliament to enable the Company to raise more capital and also to install pipes in new buildings in the Company's area erected by authorised undertakers under

the Electricity (Supply) Acts. A. W. K.