FINANCE AND INVESTMENT
By CUSTOS
THE City, it seems, is not prepared at this stage to give man hostages to fortune. Any idea that the Labour defeat in Australia following so quickly on the heels of the New Zealand election, !nigh touch off a boom in Throgmorton Street has been effective!) dis pelted. After a brief marking up of prices a reaction set in %she it became only too clear that the buying movement had petered out The City has not abandoned hope of a Socialist defeat here, bu is acting wisely in refusing to rush at the share market. For on thing it is by no means certain that a Conservative Governmen would mean higher prices for gilt-edged. What does Sir Joh Anderson mean when he advocates " an intelligent use of inter rates " ? For another, a change of government would not us!): in an era of easy prosperity. The inflation problem would stil be there and so would the dollar gap. I am not suggesting t the Stock Exchange would not be entitled to indulge in some so of celebration, but it would need to keep its feet on the ground and probably would. Since at the moment it has not got ev the election date to work on, it is obviously doing the right thi in marking time.
Australian Stocks Rise
While the Australian election result has, understandably enou: failed to start any sort of boom in stock markets here, it has qui logically brought a sharp improvement in the prices of Australia bank shares and the shares of the leading pastoral companies. WI the threat of nationalisation now definitely removed and with prospect of less competition from the Commonwealth Bank trading banks should be able, other things being equal, to incr their net earnings. Since political ratber than purely econom factors held bank share prices down, the present rally seems full justified. One interesting development which may be expected t take place in the new political conditions is the merger between
Union Bank of Australia and the Bank of Australasia. .
So far, Australian gold shares have made only a modest respon to the Labour defeat, although it is hoped that the new regime th take a friendly view of the problems confronting the Westrali mining industry. The reason for the hesitancy in the share mark is doubtless the uncertainties surrounding the Australian exchang rate. If, as is thought likely in many quarters, Australia sees II to eliminate or at least to reduce the discount on the Australia pound vis-a-vis sterling, that would obviously be a blow to It gold-mining companies, unless some special subsidy were granted Now that the election is over, views on the Australian exchang• rate seem to be just as divided as ever. On the one hand, it clear that the new Government would like to use an appreciatio of the exchange as a means of cheapening imports and so holdin down the cost of living. On the other, it must feel reluctant t introduce such a controversial measure, strongly opposed by th• exporting interests, at such an early stage.
A Cheap Preference
Earlier this year I called attention to the prospects of the Preference shares of Phoenix Oil Products. These shares have no fallen back to 7s. 3d., which seems to underrate the capital repay ment probabilities. During the summer the company succeed in selling its German, Austrian and Belgian subsidiaries to th Anglo-Iranian Oil Company for a total of £258,307. This equivalent to 8s. 8d. a share on the f600,000 of Preference capita and the directors have intimated that it is their intention to apply to the Court for permission to make a repayment. The amoun officially mentioned is 7s. 6d. a share. I understand that the dela in making a repayment has been due to the tidying up of company's taxation position in this country and that a settlemen is expected in the near future. If the suggested repayment of 7s. 6d takes place, a buyer at today's price will be getting his money bac and still be left with the first charge on the company's remain' assets. They would comprise something over Is. 6d. a share cash; certain assets of doubtful value in South Africa and the Oa in the Yugoslavian subsidiary, which are carried in the books 3 over £80,000. In respect of this Yugoslavian holding, Phoenix 0' Products will rank with other British companies 4vith investmo in that country for its share in compensation under the recall concluded agreement. Altogether, on a conservative estimate. would seem that a repayment total of something over 10.s. Phoenix Oil Preference share is in nrospect.
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