THE HONGKONG DAILY PRESS, FRIDAY, OCTOBER 23RD, 1925
THE WORLD RENOWNED COCKTAIL
BACARDI
AND ITS MANY USES.
"BACARDI RICKEY
Wine-glass of Bacardi
Juice of half a Cáma
One lump of ice
Serve in high-ball glass
Add Sparkling Water.
BACARDI GROG
One quart of Bacardi
Oss pound of Sugar
One quart of Formosa Oolong Təm
Use the grog, adding squal
Part of very hot water
Serve with slices of lemon.
Dissolve sugar in hot watar.
AGENTS:
BACARDI HIGHBALL
Place a piece of ice in glass
Ons glass of Bacardi
Fill glass with Sparkling Water.
BACARDI MILK PUNCH One Glass hot Milk
One tablespoonful of sugar
"A punch of nutmeg
• DES
The yolk of an
A glass of Bacardi
Beat up thoroughly
Egg with the sugar
the yolk of, the
Add milk Bacardi and nutmeg
Mix it thoroughly
A delicions panch and a splendid
beverage for Colds.
GANDE, PRICE & CO., LTD., Wine & Spirit Merchants.
St. George's Buildings, No. 2 Ice House Street, Tel. C. 135.
HONGKONG.
[33
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MITSUL BUSSAN KÄISKA LTD”
THE STOCK EXCHANGE ENQUIRY.
EXHAUSTIVE REPORT BY GOVERNMENT. COMMISSION.
FRANK CRITICISM AND SUGGESTIONS,
It may be recalled that in a proclamation dated August 14th, 1995, H.E. the Governor appointed a Committee to enquire into the as- rangerpents existing in Hongkong for dealing in stocks and shares of public companies. Its members were the Hon, Sir Claud Severn, the Hon. Mr. R. H. Kotewall, Mr. A. H. Barlow, Mr. D. G. M. Bernard. Mr. L. E. Hopkins, Mr. R. F. Mattingly. Mr. E. M. Raymond, and. Mr. P. Tester, These gentlemen have just completed their labours, and an adɛtirably clear and exhaustive 'report, prepared by them, was laid before yesterday's meeting of the Legislative Council.
In the introduction, the Committee state that they held meetings on Angast 20th and 27th, and Septemper 3rd, toth, and 17th, hearing the evidence of the following, gentlemen on the dates named: On August 27th, Mr. U. M. N. da Silva and Mr. J. T. Bagram: on September ard, Mr. Menino Fernandez, „Mr. W. Ha, and Mr. Soo Pei Shan; on September 10th, Mr. W. J. Carroll, the Hon Mr. C. Mel Messer, and Mr. J. P. Braga; and on September 17th, Mr. Lee Hysan, 'Mr. M.' A. Razack, and Mr. Joseph Goal Certain memoranda in addition were submitted to the Committee, by Messrs. J. P. Braga, F. H. Kew, P. M. N. da Silva, J. T. Bagram, and Lee Hysan. The Committee met on October 13th, 16th, and 19th to consider their report, which is divid ed into three parts, and the major portion which we give below:---
13.The causes of the collapse of the market in June were the following:- (A) Dealing by unsound brokers with un-
sound clients.
PART L
"HISTORY OF THE EXCHANGES. 3.-There are three Exchanges in Hong- kong, mainely: the Hongkong Stock Ex- change, the Hongkong Sharebrokers' Association and the Share and, Rent Estate Brokers' Society of Hongkong There are also many share brokers who are not merabers of any Exchange.
-The Hongkong Stock Exchange was originally formed in the year 1851 and ¦ took its present form in the year 1902. with a membership limited to 24.
(b) Dealing by unsound brokers with
sound clients.
(e) Over-financing by native banks who, we are informed, were in the habit
of advancing up to 80 per cent, or 50 per cent. of the market value of the shares. Even 100 per cent. has been mentioned.
(d) The geñoral apprehension felt by the
Chinese community as to the prob able effect of the threatened strike and a boycott on the prosperity of Hongkong.
On the 1st October, 1921, owing to the refusal of the Hongkong Stock "Fachange to admit certain applicants w new Association came into being, same- ly the Hongkong Sharebrokers' Asso. | At the last moment becurred the ciation, whose Memorandum and Articles; moratorium granted to the native banks, of Association are practically identical the closing of the Stock Exchange, the with those of the Hongkong Stock Ex-postponement of the Settlement and the change,
Madden withdrawal of the
I
extensive 7-In June, 1923, the third body came redit fatellities which had hitherto exist- into existence, namely: the Share and ed.
Real Estate Brokers Society of Hong. At the same the we are of opinion kong which was started by bla..that if the first two factors (a) and (b). Wright and Mr. T W Hornby, former had not been present the results would members of the Hongkong Stock Ex: not have been nearly so serious and change. These gentlemen, who retamed would not have affected in large « num-- to the Colony in the year 1984, were not ber of persons. willing to comply with the conditions Sxed for their re-entry into the Hong kong Stock Exchange and consequently let it be known that they were going to form a third Exchange.
8.-Throughout the evidence, three-bodies, are referred to as No.:
No.. and No. 3 or the First, second and Third Exchanges respectively. "
9-A distinctive "Teature in the rules of the third Exchange is that by Article 22 each meinher of the Society must make a deposit of 850,000 un the 1st Janhary, 1p25, and in the ease of mem- bers elected after that date then, within one week after election, they must de- posit the sum of $30,000 in cash with the Committee. We have, it in evidence- that this sam was subsequently reduced to $20,000 made payable in three instal- ments of $10,000 each on the 1st April.. 1925, 1st October. 1925, and 1st April,
1936
PART 11.
CRITICISM OF THE EXCHANGE.
14--We are of the opinion that the varinus Exchanges have not been pre- perly managed and administered. particular, the following criticisms seem jastified from the evidence of the wit
.."
CAM-
(a) The Committees are so large that nearly every firm belonging to an Exchange has a member or a partner ton, the Committee. It is obvious that this makes disciplinary mea sures difficult.
اری
(b) The Articles of "Association of the Exchanges appear to make it im- 'possible for the Committees to take action against defaulting members except on receipt of a complaint. Such complaints are rarely forth- coming and consequently members. are permitted to continue to trade although they are known to be in solvent. At the same time the Com- mitters do not appear to have exer-
H-The number of members of the third Exchange was limited to thirty, but we were informed by afr. Fermindez in his evidence that because of the res trictions imposed by Rule 29 the numbercised such powers as they possessed. became less: in fact, only six members (1) A former Vire-Chairman of the paid their Grst instalment of $10,000, one of whom has asked for it to he return- ed.
All the three Exchanges have been inorporated under the longkung Companies Ordinances, The first Ex- change was incorporated under the Com- panies Ordinances, 1895-1800; the second Exchange under the Companies Ordin- |ances, 11-1021; and the third 'Exchange under the Companies Ordinances, 1911. 1923. Seats on the first two Exchanges have, become very valuable; the last seat sold on the Hongkong Stock Exchange realised mum of $40,000. The rise in price was very rapid during the fast three years, as we have it in evidence that six years ago a seat was bought far $1,500. In 1924 the second Exchange increased its membership from 15 to 24 by admitting "nine new members at a cost of $15,000 a sent, which sum was deposited with the Committee. Besides these Exchanges there is a number of outside brokers, and the number of brokers generally is greatly increased ty the Article common to all three Ex- changes which allows each member, or in the case of a partnership such part- nership to employ one authorised clerk who is not a member of the Exchange. It will thus be seen that there may be over 100 persoas connected with the three Exchanges, all authorized to deel in shares with members of the public.
12-During the last few years there has been a large increase in speculative operations on the share market. This increase, was mainly due to a great in- flux of Chinese money which, on account of the unsettled conditions prevailing in China, was brought into the Colony for valety. Money became cheap and thin. encouraged speculation both on real and anticipated prosperity. There has been a great deal of rest prosperity among local companies during the last few years," As an examination of their balance sheets will show, and consequently, the value of their shares was bound to rise. In many cases, however, they have risen beyond the figure which the prosperity of the company justifies. With the in- crease of speculation many persons gave up their ordinary business and took up the work of share broking either as members of an exchange or an outs do brokers or authorized clerks.
Sharebrokers' Association atated in the course of his evidence that he saw no objection to kar carry- ""ing on business while he was insol. vent, and this seems to have been the attitude of all the Exchanges
• provided that admission of liability was made by the giving of promis sory notes. It seems to bave been con- sidered quite in order for a broker to go on dealing even if he was incapable of meeting existing obliga tions. No formal complaint was made to the Committee in
Bay such case and it has been given in evid ence that there has been no recent case of a member of any of the Exchanges being expelled, saspend- ed, or even censured for failing to meet his obligations. The effect of the promissory note system was to -undermine the stability of the market although the settlements up- purently were carried through with- out any untoward difficulty. Sach a position was absolutely unsound and when difficulties arose in con- aection" with the Junc Settlement the real position was exposed.
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Warehousing of Goods of all Description.
For Terms and Particulara
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June Settlement the PARTITIONS & CEILINGS.
(d) Although brokers guarantee every transaction which they pat through they have accepted business with clients as to whose faancial stability they have had no knowledge. No business man would enter into the reckless guarantees which Rome brokers, appear to have undertaken. In other words there has been déal ing with persons who obviously could not pay if they lost...
(e) There has been no disclosure by brokers in cases where they have been dealing as principals on their 'own · account and it was "even" ad- mitted by some that it was customary to charge brokerage in such casRÉ There is thus every facility and every inducement to the broker ta speculate on his own account to a greater extent than he can afford. (There are no rulca, or at best in-
sufficient rules, for the conduct of Settlement Days or any machinery. for the internal working of the Ex- changes. ***
(Continued on page d.)
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Representatives for South China ST. GEORGE'S BUILDING, HONGKONG) -