The capital market:
shares forge ahead.
The ultimate consequence of this was that the
money market rate in Germany in 1985 showed
a net fall of nearly 1 while that in the
Netherlands, measured against the 3-month
interbank rates, remained at 5% throughout
the year. In view of the intrinsic strength of the
guilder, however, it may be anticipated that the
gap will narrow in 1986.
The debit balance of the commercial banks with
the central bank, the indicator of the money
market deficit in the narrow sense, rose to a
record level of Fl. 14.4 billion in 1985.
Among the causes of this were a further
expansion of the supply of banknotes and wide
fluctuations resulting from payments in respect
of government loans. Of even greater
significance were the interventions to slow the
rise of the dollar. However, the Nederlandsche
Bank succeeded in keeping the deficits below the
point at which an undesirable rise in interest
rates would have become necessary. This was
largely achieved with special loans. In 1984, the
banks took up an average of Fl. 3.3 billion
over 188 days; in 1985 the figure was Fl. 4.2
billion over 284 days. We would, however,
point out that the emphasis which has come to
be placed on this instrument has the effect of
squeezing the banks' interest margins, because
the rates applying to special loans are at least
Vs% above the customary rate for advances.
Interest rates in the Dutch capital market in
1985 generally moved in line with Ihusr in ilir
money market. There was, however, one differ
ence: capital market rates declined un balance
owing to the fact that the gap between long-term
rates in Germany and in the Netherlands
remained almost constant. The lowest point was
reached in September when, for the first time
since 1978, a 6.75% State loan was success
fully issued.
No major changes occurred on the supply side
of the market, institutional investors again being
by far the largest single group. However, there
was a noticeable increase in interest from
abroad, not only in State bonds but also in
shares.
The Government, with loans aggregating some
34 billion guilders, was again by far the largest
borrower. The gross sum obtained in the market
was boosted by the fact that in two operations
the Government, availing itself of the right of
premature redemption, repaid a total of 1.5
billion guilders. The borrowing by local
authorities and housing associations also
increased due to the use of this right.
As the Government looked to the private
market for a higher than usual proportion
of its needs - a fact which was due in part to the
longer loan terms available there -, there was a
certain amount of slack in the public bond
market. This was taken up by industry and the
banks.
Although the primary market continued to be
dominated by fixed-interest securities, the
number of share issues increased significantly.
These yielded a total of Fl. 1.7 billion, an
appreciable increase on the figures for 1984 and
earlier years.
The conditions were extremely favourable for
share issues, as may be gauged from the fact that
the ANP-CBS general index rose from 186.6 at
the beginning of the year to a new high of 255.6
in December. This was accompanied by a record
The Amsterdam
Stock Exchange.
