Finance—Public and Private

Market Tendencies—The Rise in Industrials

AT the beginning of the present year, and, indeed, on some previous occasions, when surveying the general Stock Exchange outlook, I expressed the view that while there was, perhaps, little more than steadiness or firmness to be looked for in gilt-edged descriptions, there were not wanting signs of a shifting of interest to the variable dividend groups with the chances of a con- siderable capital appreciation.

I am fully conscious of the fact that these columns contain little in the way of selection of individual securities for the investor. As to this, I must at once plead guilty to a desire neither to intrude upon the province of the broker nor to expose too acutely my own shortcomings in the matter of individual selection. On the other hand, a close observation of markets extending over a prolonged period undoubtedly does, or at all events should, help one to detect certain broad influences making for a general drift of capital in a particular direction.

BRITISH FUNDS STATIONARY.

Thus, for the past two years it has been fairly evident that British Funds and kindred securities were unlikely to go much higher in the immediate future, and for the following among other reasons : (a) There was no prospect of a material reduction in taxation ; (b) there were no signs of a big fall in money rates ; (c) there was every sign of fresh capital requirements in the trustee group being on a large scale for some time to come ; and (d) on the other hand, the continued stagnation of trade and uncertainty with regard to the outlook made it probable that steady investment business would be sufficient to keep the market tolerably firm.

FACTORS FAVOURABLE TO INDUSTRIALS.

At the same time certain plain factors made for an appreciation in the variable dividend groups. - For (a) certain industries were doing remarkably well not- withstanding depression in the key industries ; (b) in some of the key industries themselves there were prospects of the tide turning, while prices were at an abnormally low level ; and (c) investors were disposed to acquire stocks for an appreciation in capital value quite as much as for dividend purposes.

Accordingly, it will be found that whereas since the beginning of the year prices of British Funds—when allowance is made for the date on which interest is dis- bursed—have scarcely varied from the level at the commencement of the year, the rise in the variable dividend group has been quite remarkable. Here, for example, is a specimen list showing some of the gains which have taken place, and this list, be it noted, could be extended to a much greater length.

Price on Jan. 3, Latest

Security 1927. Price. Rise.

Allied Newspapers 52/6 74/6 22/0 Allsopp (S.) & Sons .. 18/6 22/9 4/3 Barcelona Traction Com. 35/ 64/ 29 Brazilian Traction Corn. 1061 179} 72} Bass, Ratcliff Ord. .. 57/9 68/6 10/9 British Celanese Pref. .. 9/3 28/3 19/0 „ Ordinary .. 6/0 • 49/0 43/0 Bryant & May 46/3 101/101 55/7/ Columbia Graphophone 59/6 113/0 53/6 Courtaulds .. 98/9 134/41 35/7/ Cunard Steamship .. 18/6 , 25/9 7/3 Dunlop Rubber .. .. 27/0 37/0 10/0 Ever Ready .. .. 73/9 86/6 12/9 Gramophone Company 68/0 119/41 51/41

58/0 65/0 7/0 Henley's Telegraph .. 85/0 95/0 10/0 Herrburger, Brooks .. 46/3 63/9 17/6 Imperial Chemical Ord. • 21/71 27/0 5/41

Pf Deferred ..

6/6 8/71 2/1/ Lucas (J.) 76 /3 87 /6 11/3 Marconi's Wireless .. 14/6 19/6 5/0 Mond Nickel 38/9 55/71 16/101 Napier (D.) 48/6 58/11 9/71 P. & 0. Steam Navgtn. 2421 285 _ 424 Van den Bergh .. 27/6 43/14 15/71 Wardle & Davenport .. 57/6 78/14 20/7/ INCREASED CONSUMPTION.

The foregoing list, it will be noted, is a very varied one, including Newspapers, the Tobacco industry, the Match industry, and Artificial Silk shares, while, in the P. & 0. Company, one at least of the key industries is represented. Unfortunately, however, with the exception, perhaps, of Shipping and Artificial Silk=where our exports arc increasing—there is little in this movement of prices, however indicative of prosperity as regards -the-particular companies, which suggests an expansion in our export trade. It merely affords evidence of activity in our retail trades and the continued power of the consumer. This power, however, must be attributed to some -extent to the generally higher level of wages, the greater number (including women) of wage-earners and what is sometimes euphemistically described as the " higher standard of living." On the whole, I am afraid it can scarcely be regarded as representing a real improvement in the economic position of the country as a whole.

AN IMPORTANT POINT.

That, however, is not the point with which we are immediately concerned; namely, the general trend. of markets and the disposition to acquire stocks where there are prospects of an appreciation in capital values based on increasing prosperity for the individual company. A glance at some of the gains will show how remarkable has been the movement, the outstanding feature being the great rise in some of the shares of the Artificial Silk companies, and also in the shares of the Gramophone and Graphophone Companies. Indeed, it may be doubted whether the rubber boom itself showed more sensational gains than has taken place in some of these Home Indus- trial descriptions. Whether the movement will extend still further I should not like to say. But one point which I think is at least worthy, of attention is that in the case of some of those companies which have done best, such, for example, as the Artificial Silk and the Gramo phone companies, profits have been secured on increased turn- over and comparatively low prices rather than on re- stricted production and high prices. That is a point which cannot be too strongly emphasized, and it may be commended to some of the key industries, including English Railways.

A MELANCHOLY EXCEPTION.

For I am reminded that if I happen to have been right when at the beginning of the year I indicated this shifting of interest from gilt-edged stocks to the variable dividend and especially the Industrial group, I was certainly " out of it " in including in the groups likely to appreciate English Railway stocks. I had thought that with railway traffics comparing with the appalling figures of last year and with the lessons presumably imparted by the great strike, we might have seen Railway stocks, which last year had fallen considerably, experience a fairly general rally. Such, however, has not been the case, for most of them to-day stand quite near to the lowest points on record. That is a matter, however, with which I have dealt quite recently and at some length in these pages, and my only reason for mentioning the point in this article is to disavow the slightest claim to any special prescience in the suggestions thrown out at the beginning of the year with regard to the probable course of markets during 1927.

ARTHUR W. KIDDY.