TECHNICAL INDUSTRIAL " SHAKE-OUT" Copper Shares The Feature
By Our City Editor The warning I issued in my last article concerning the danger of over-speculation has been proved well timed by the reactionary course of the stock markets during the past week. This shake-out, which has been largely confined to the Home sections, is attributable to purely technical conditions, and has little.tangible connection with the further developments ía the international situations, although jobbers may have used them as an excuse to mark down prices. It is the sequence to the considerable speculative position, which had grown up in recent weeks, and the resultant " over-bought " condition of the public in anticipation of a continued rise in prices. This was a technically weak state of affairs, since it only required a few sellers to start a general movement to liquidate on the part of speculators, which would also tempt investors to secure profits. This is what has occurred.
This reaction should have a salutary effect on markets, since it will have eliminated many weak accounts, while the lower price levels now ruling may encourage a resumption of demand for the new account, which begins on Monday.
There has been a very marked reduction in the volume of Stock Exchange business during the past week, and a reactionary tendency was noticeable from the outset, particularly in the case of Industrials. Giltedged securities were quiet with minor losses. Leading Argentine Rail stocks
declined on profit-taking. Home Rails have been steady with a firm feature in L.M.S. Ordinary. Business in Industrials was very quiet., and price movements were irregular with numerous losses. The Iron and Steel group showed resistance to selling, but most issues suffered small declines. The Aircraft section was also dull, while Motors failed to respond to the good business at Olympia. Tobaccos were all lower, particularly Imperials and Carreras. Among other prominent issues., dull features were supplied by Spillers and Electrical and Musical Industries. Sudan Plantations rose slightly on the profit increase shown in the
report As forecast in this feature, the past year's dividend rate has been increased from 8 to 10 per cent. Breweries were dull. On the other hand, the Shipping group improved on the latest laid-up tonnage figures. Cunards were one of the brightest spots. Among minor industrials, British Thermostats have been very strong up to around 25s. on an acute shortage of shares. I first discussed these at about 1 Is. 6d., and should now strongly advise holders to sell, as the shares appear overvalued.
In other markets, there has been a moderate continuance of the recent activity in Oils, although this section has also been subject to considerable selling, notably in the case of Shells, Royal Dutch, and V.O.C. Transatlantic stocks have been weak on the reaction on Wall Street. Rubbers were very idle.
Copper Restriction Cut
Rhodesian copper shares have again been the centre of Stock Exchange attention during the past week. The previous activity derived further stimulus from the announcement on Monday of a further cut in the rate of curtailment of production from 15 to 5 per cent. as from November 1. This follows a cut of 5 per cent. in the preceding week. The probable explanation of these developments is that the considerable reduction in world stocks of the metal, on account of the big demand for electrical and armament purposes, is influencing too rapid an advance in the price, which the Restriction group are desirous of keeping in the region of £40 per ton for the moment. It is not altogether to the advantage of the Northern Rhodesia producers that the copper price should go far above the £40 mark, as this would tend to favour the more costly production of the American mines.
Copper shares experienced a very heavy turnover during the past week, although price movements have been rather more irregular. Rhodesian Anglo-Americans were again among the most prominent issues, touching 30s. on Monday, although they have subsequently moved slightly lower.
Gold Shares Ease
Gold shares generally inclined easier. Among Kathie, Randfonteins were particularly dull at the beginning of the wee' on the labour difficulties, but partially recovered later. West Wits. and East Rands also eased. The West African group lost ground on profit-taking with the exception of Gold Coast Selection Trust. Westralians were also dull. Among Diamond issues, De Beers were good on hopes of some payment of the arrears of Preference dividend. Tin shares have been weak.
Signs of trade recovery beyond our shores, coupled with the fact that oppor tunities of capital appreciation are now so
limited among internal shares, is encouraging a transfer of investment interest to a
few carefully selected, foreign enterprises, whose shares have a free market in London. Argentine shares in particular have been attracting attention on account of the considerable progress towards recovery attained in that country in 1935.
A popular Argentine share which has experienced heavy demand lately is the 10 per cent. Cumulative Participating Prefer ence $5 variety of the Argentine Navigation Co., now priced in the region of 22s. 9d. The nominal value is equivalent to about £1. This company's business, which was founded in 1876, has always been in English hands, and is concerned with the river and coastal transport trade of the Argentine, of which it now has a virtual monopoly. At the end of last year, the combined fleets of the company consisted of 373 craft of all types, apart from numerous small boats. In 1931 the fleets were valued by Lloyds' agents at £3,608,218. The company besides owns shipyards, slipways, repair shops, motor vehicles, etc.
The rate of Preference dividend for the past year ended December 31 last, was 9 per cent., and, since an interim payment of 4 per cent. has already been made in respect of the current year, the market expect that the full rate of 10 per cent. will be forthcoming. An additional attraction is that 2 per cent. still remains unpaid for 1934. Gross takings for the first quarter of the current year were 313,000 pesos higher than in the same period of 1935, and, in view of the likelihood of an improvement in the Argentine rate of exchange, the outlook is favourable for the maintenance of the company's progress.
The work of the Low Temperature Carbonisation Company, whose 2s. shares I have mentioned on several occasions, is interestingly associated with the aims of the National Smoke Abatement Society of Great Britain, which, with the co-operation of Government departments and industrial associations. has organised a special exhibition on " Smoke Abatement " at the Science Museum, South Kensington. The exhibition illustrates the nature and effects of the pollution of the atmosphere by coal smoke, and the scientific means now available for reducing it. The process of Low Temperature Carbonisation is prominently displayed, principally in connection with the chief product, "Coalite " Smokeless Fuel, and is worth a visit by those interested in the company. The exhibition concludes at the end of this month.
Low Temperature shares have provided one of the exceptions to the generally lower trend this week, being somewhat harder around 3s. 8i.d. on good demand coupled with a shortage of stock. The company's financial year ends on October 31, and the market anticipate a steady accumulation of strength in the shares in anticipation of the report and accounts, usually published in early December. They are expected to make a good showing.
Largely an account of the inference of the name, the 3s. shares of the Rhodesia Copper and Gerreral Exploration and Finance Co. have been very active during the past week up to around 4s. 9d. I discussed these at length three weeks ago when the price was ls. less. Actually the copper interest is comparatively small, but the appreciation is deserved, since the other share interests, which are almost universal, have improved considerably during the past twelve months. Although speculative, I should advise holders to retain these shares for the moment.