Investment Notes
By CUSTOS
THE equity share markets are still being re- strained by politics. In Wall Street the boom has been slowed down by the racial crisis: in Throgmorton Street the upward trend has been halted by government crises, scandals and Mr. Wilson's depressing talk of restriction of profits and dividends. Profits, being a residual figure in a trading account, cannot, of course, be restricted by legislation, but they can be taxed. Does this mean the revival of the obnoxious differential profits tax? The equity market future now seems to be bound up with Mr. Macmillan's survival.
Burmah Oil
The BURMAH OIL affair must not be allowed to end in a lot of black smoke. It has clearly become improper for a parochial Glasgow board to hold 24+ per cent of the government-con- trolled BRITISH PETROLEUM. There is nothing now to stop an American giant like STANDARD OIL OF NEW JERSEY making a bid on the same lines but at a higher figure. The Government should therefore intervene and direct the Burmah Oil board to distribute its BP shares to its British shareholders. Its If per cent holding in SHELL, being a purely commercial investment, need not be disturbed. It is hardly credible that BP and Shell should have made their bid without con- sulting the Treasury and obtaining its blessing. Why they did not also consult the top directors of Burmah is a mystery. If they were afraid of a leak they were ill-advised, for the pre-bid rise in Burmah indicated that some leak had in fact occurred. The rough rejection of the bid and its withdrawal within minutes showed that all three (Burmah, BP and Shell) chairmen had by that time lost their tempers. No doubt BP- Shell were afraid of the market running away, but they should have assessed that risk before making their bid and faced the music. An un- reasonable market price is never held. At one time the price rose to 67s. 6d. and when the bid was withdrawn it dropped momentarily to 54s. 9d. Stock Exchange members have good reason to feel sore at these oil-magnate tan- trums. At the moment of writing it has recovered to 64s., and until the report of the American experts is received, whom Burmah has called in to value their oil and gas reserves, the market is likely to remain firm. Indeed, it is being talked up to 70s. As one stockbroker said : 'Burmah will never be the same again.'
Rhodesian Copper
I called attention to NcHANGA on January 4, when the shares were around 40s. 9d. and still depressed by the political risks. They are now 57s., yielding still as 'much as 13 per cent. My view was that there would be little trouble in getting the new Government of an independent Northern Rhodesia to come to terms with the two big copper groups, which happen to have liberal-minded bosses in Mr. Harry Oppen- heimer and Sir Ronald Prain. A difficulty exists in the mining royalties, which are still due to 'CHARTERED' (British South African Company) until 1986, but I believe that a way out is being discussed whereby the copper groups put up the money to enable the new Government to buy out these royalties. (In effect, the copper com- panies will merely be capitalising their future royalty payments.) 'Chartered' have built up in- vestments outside South Africa (now a quarter of the total) in anticipation of the cessation of mining royalties and will eventually become a mining and industrial investment house weighted by, but not dependent on, South Africa. The shares have become a better market and at 58s. (compared with a low of 42s. last year) yield 12.8 per cent.
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