July The fact that the Ministries of Industry. and Finance in Nanking have issued an order insisting on two Chinese exchanges in Shanghai amalgamate ing recalls the extraordinary' boom which took place ten or dozen years ago here in the establishment of such institutions. Over a period of weeks at the time referred to all sorts of—Chinese—financiers, merchants and men of straw—were engaged in forming companies to promote exchanges for every purpose in the world, having seen what profits had about that time been made by Japanese institutions of a like character. Japanese exchanges at that time took, and probably, still take, a percentage from all business' transacted, and_ this meant that in a good year of business shares in an exchange itself were well worth buying. Not only so, but they could even form the medium of speculation in exactly the same manner as any ordinarily listed stock. On the basis of the successful years which had gone before and in the expectation of reaping handsome rewards, there arose this; extraordinary rush by the public to found exchanges. Premises which appeared to be even moderately suitable for the business in hand rapidly rose to a premium, and even building! operations were commenced when further space was no! longer available. The result was that by the time the boom had finished not only were there exchanges for all shares, but even special exchanges were: established for particular types of shares, while for commercial commodities institutions of the Kind mentioned existed without number. Actually, when parently every class of commodity in which one could deal had been exhausted, the ingenuity of the exchange promoters turned to such channels as night exchanges and the like, making confusion still worse confounded. These exchanges, with their ephemeral existence, have disappeared and the type in-which Nanking is interested. is of a different character.
The exchanges with which the order of the Nanking Government deals are the Chartered Stock & Produce Exchange and the China. Mercantile Stock Exchange of Shanghai, and the reasons for the necessity, of amalgamation. are set forth in the order of the Ministries concerned in.the following terms:
There have often been wide iserepancies between the quota-ions of Government bonds. on the Chartered Exchange and on the Mercantile Stock Exchange. That there should have been such marked variations in the bond quotations at the same time and place has served not only to shake public confidence in the Government's credit but has also enabled unscrupulous merchants to carry fon reckless speculation and the rumour-mongers to fabricate dis-Quieting rumours, In order to stabilize the bond market as well as to set the mind of the public at rest, the Ministries concerned now deem it imperatively necessary to order the amalgamation of the stocks and bonds "department of the Chartered Stock & Produce Exchange with the China Mercantile Stock Exchange in accordance with the Exchange Lay There need be no quarrel with. the point of view of th ment. While the multiplicity of the exchanges set up during that unfortunate boom year killed the. majority of them because there was not enough genuine business keep them going, it is on different grounds here that two institutions dealing in exactly the same sort of business should not have a separate existence side by side." The fact of the discrepancies in prices mention-very bad thing for the bond market—a market which should be the barometer of the political situation of the country and one which should not be susceptible to violent, fluctuations except in cases of acute political' crisis, That speculators should be able to take advantage of a state of affairs which brings bonds into the category of highly speculctive stocks is not a position to be encouraged.
Another very sound reason exists for the amalgamation of two such institutions as those mentioned. It will be remembered that for many years the foreign stockbrokers in Shanghai belonged to one of two separate exchanges, but _ultimately a happier state of affairs prevailed and their interests, which after all were identical, were amalgamated. The result: has been beneficial not only to the brokers themselves but also to the public. Where foreign stocks in Shanghai are dealt in the general complaint has been on the ground of the narrowness of the market, which frequently connotes the "impossibility of. liquidating a Jarge holding at short notice. There is no doubt that the amalgamation alluded to has brought about a freer market, and still further benefit should be seen from this step in periods of increased Chinese exchanges in question, phasized that the growing importance of Chinese Government bonds—apparently the principal medium of business transacted—calls for a market handled by' experienced brokers which will reflect their true value. These securities now occupy a position in the financial and omrsetclst especially of a great metropolis sich as Shanghai, which was not the case a few years ago, and their Securities from day to day calls for the keenest scrutiny from those in charge of very far-reaching interests. A freer market for this class of invest-men, which should: result, from, the ' amalgamation of the exchanges in question, is bound to be of benefit to the Chinese business public, and a sunil state of affairs should result in other classes. of stocks in which dealings take place,
Text read from the printed page and cleaned; old type leaves the occasional error.