The events of Monday in connection with the Chinese Bond market should tend to allay any uneasiness which might have been created by the publication of the instructions of the Nationalist Government's try of Finance to the China Merchants Stock Exchange. It is in the nature of things that when a goveroment interferes with the ordinary processes, of commerce—though perhaps th is not, enrively an appropria word to use in connection with the present and immediately past manipulation of the domestic Bond marsct no little suspicion is created thereby; in this particular instance whatever may' have been thought at first was discounted by the early recovery the bonds to an extent which ited a suspension of trading. Briefly explained the regulations provide that, when the price of the bonds varies as much as $4, a suspension becomes necessary in order that those engaged in trading on margin shall be afforded an opportunity to put up the necessary extra amount of cover. Thus the early improvement on Monday, apparently caused by the reaction at the news of a better situation via @ vis of Japan m in Manchuria, led to a strong upward market. So much so) that when the operations of the exchange were suspended out side trading was proceeded with showing an even greater crease in prices. Tt is now an open secret that the move which the Ministry of Finance ultimate ly felt called upon to make wa suggested to it some time ago, and that st then felt " natural reluctance to take a step which carries with it the danger of increasing anxiety in times of such uneasiness such as these through which the country is now passing.
The main factors contributing tothe state of affairs which made such a move neet two in number—the Japanese crisis and the amount' of gambling which has been going on in domestic bonds. It may be contended that in this particular instance the second go dependent upon the first to amount to one and the same thing in the relationship of symptom to cause, but it is an interesting reflection that with all the bitter lessons Shanghai has had to learn in the past on the subject of inordinate gamb-Hing in securities, it seems impossible to put a final and complete stop to it. On the face of it'the manner in which Nanking. has met its obligations with re gard to the domestic bonds it has issued should to a large extent have offset the natural disquiet found in the bond market after the incident of September 18, All obligations have been as they have become due and there is no possible ground for believing that the payments to be made in the near future will mot be met, Assurance has been forthcoming that funds for the next drawing of bonds for retirement and the payment of interest are in hand. That the Manchurian crisis should have a depressing effect on the market was to be expected, but the extent to which the market was depressed is largely due to the amount of gambling that has been carried on in this medium, and the anxiety of the "shorts" to get out of difficulties into which their initial enthusiasms have landed them. It will be noticed, however, that the rule against unofficial trading issued by the China Merchants Stock Exchange has. not been obeyed: jin its entirety by traders, for though the exchange suspended operations in accordance with the Ministry's instructions when the limit of movement had been reached, outside trading and, therefore, unofficial, was carried lon throughout the day.
Whatever may be the judgment to be passed upon the method of financing the govern ent's requirements, by the.
ing of domestic bond: having in view all the cireumstances, there appears to be little fear among those most intimately concerned la their flotation that the liabilities thus created are in any danger of, Inever being met. The evidence at present is to the contrary, and it is contended that the resources! of the country are such that the sum total of such obligations, en when it amounts to as much 240,000,000 for the present year, does' not represent an obligation at all disproportionate with the Nanking government's, inability or willingness to. pa [But the reaction which followed the rumours that Nanking and Canton were hopelessly at odds as to the formula for a rap-brochement, and the reluctance of the bankers to handle more issues of these bonds in view of ry|the tightness of money in the country in general and Shanghai in particular, point to difficulties Jwhich must' be faced in the future, Those are matters for further consideration. Immediate concern must be felt for present tendencies. If the _situation between Japan and China justified a depreciation of some twenty points in the value of] these stocks, the slight betterment in the' political situation indicated by a change in Japan's attitude which is by no 1s sufficient to secure a elution of the whole difleulty can hardly be held to justify so substantial a recovery as was. recorded on Monday. It is consequently a natural deduction that the speculative clement is having the free hand in the market which has been denied it by past, experiences. elsewhere And while there must always considerable reluctance to into frere with the normal process lof trading in securities, the tim has come for the Nanking go jemment and the China Merchants Stock Exchange to consider whether steps—in line with those adopted on other changes—should not be taken to limit the activities of influences which must be inherently pernicious and have a generally bad effect upon the market as a whole, is generally conceded that wide fluctuations of either government securities or stocks and shares are not in the best interests of the bodies issuing them, and the time has come when those responsible. might give some attention to the que tion of rounding out regulations against gambling which has done much damage to Shanghai, in the past, and may do to China in the future,
Text read from the printed page and cleaned; old type leaves the occasional error.