Share market for PNG

An exchange may be set up with assistance from the Kuala Lumpur share market.

But many insiders doubt the viability of the move.

Papua new guinea is to have its own stock ex

change, though financial

vers still question whether there are enough companies and investors to make it viable. The de cision followed a visit to Port Moresby by the chairman and general manager of the Kuala

Lumpur Stock Exchange (KLSE)

and the offer of that organisation’s assistance in setting up the Port

Moresby operation.

This in itself caused some sur &rise in Australia; it had always een assumed that the PNG bourse would be linked closely to the Au

stralian Stock Exchange, especially

since there are 16 companies listed on Australian or New Zealand stock exchanges that are either PNG domiciled or that conduct consider able business in PNG (in April, Pacific Islands Monthly reported the listing on the Australian ex change of Pc Arc Niugini NL, the first company owned in PNG to be listed since Independence).

The Australian exchange had stated on several occasions that it was ready to help set up a similar institution in Port Moresby and even in today’s difficult financial situation several major Australian broking firms have expressed a readiness to open offices there once

an exchange is operating.

So the Australians were taken by surprise at the KLSE intervention.

It is regarded as part of PNG’s growing interest in further econo mic ties with Southeast Asia; Kuala

Lumpur is a small exchange by

world standards and its officials have made the case that they can offer the PNG financial world the benefit of relevant experience, but the possible tie with the KLSE is also being seen as a logical result of Australian lack of interest in Papua New Guinea’s economy. “Apart from the mining and petroleum

sector, we’re just not getting any

investor interest from Australia, ’ said one financial consultant in Port

Moresby.

“Australians seem to have written off Papua New Guinea.”

In contrast, Asian companies appear to believe great opportuni ties exist to help restructure the

country’s capital markets. One

problem that has partially paralysed

the PNG capital market is its lack

of local institutional players: the na

tion’s major investment organisa

tions (National Provident Fund, Public Officers Superannuation Fund, Motor Vehicles Insurance Trust) have been loath to make

equity investments, partly because

they do not possess the trained staff to do so.

While the stock exchange propos al has been talked about for several years, the issue returned in November last year when Finance Minister Paul Pora repeated during his Budget speech that the Govern ment was reviving the plan. It is

understood the Malaysian High

Commissioner in Port Moresby saw the potential for his nation to be associated with the project and arranged for the KLSE delegation to visit in early April.

A few days later, the PNG Cabinet agreed in principle to establish a stock exchange m the country. Prime Minister Rabbie Namaliu announced that a high level committee made up of gov ernment officials and private fi nance officials was to be set up to work out details of the proposal and a timetable for implementa tion. The committee is clue to re port in July.

Mr Poras argument to his col leagues had been that companies within Papua New Guinea had to place excessive reliance on loan fi nance in the absence of raising

money through equity placements.

“The local market is not well inte grated with world capital markets, and thus misses out on significant

capital flows seeking investment

outlets in the more sophisticated markets of the world,’' he said.

“This includes the growth of mar kets in developing countries, espe cially in our own region.” Mr Pora said the exchange (to be capitalised in part by the KLSE) would be pri vately owned and set up at no cost to tne Government, though the Government would need to meet the initial costs of establishing a

regulatory agency.

It has been estimated that as many as 270 companies might list their shares; private financial obser vers believe the likely initial figure will be between 30 and 50, but

PNG’s larger private companies

may be encouraged to ‘go public’.

The potential demand for holding

listed stocks is currently estimated at KB4 million, and the existence of a stock exchange would be impor tant for major floats such as that planned for MIM Holdings’ sub sidiary Highlands Gold Ltd, one of the partners in the giant Porgera

gold project.

The Port Moresby exchange

could be in operation oy late 1990, but the Government will need to make major amendments to the

Companies Act, including; drafting

legislation for a securities agency and the licensing of stockbrokers; changes to legislation relating to the investment requirements of the National Provident Fund, Public Officers’ Superannuation Fund and Motor Vehicles Insurance Trust; al teration of the Income Tax Act to

remove impediments to trading

securities; and amendments to the Central Banking Act and foreign exchange regulations to allow for an easier flow of investment funds.

The big question, however, re mains: is tnere adequate equity capital within PNG? Angco was badly disappointed when it tried to raise just K 5 million by a public float, and if local investments will not or, more precisely, cannot come up with equity capital, there will be

a major dependence on foreign

money. In the absence of Austra lian interest, this will be coming from the Asian capital markets and will thus take Papua New Guinea one step further from its traditional ties with Australia.

□ Nz Co Shifts To Fui

THE TRANSFER of garment firms to take advantage of low wages in Fiji continues with the decision of Hamilton-based New Zealand clo thing maker Bruce Powell to shift his operations to Fiji. The move was made necessary by growing

competition from cheap imported

products that are driving New Zea land factories out of business.

The Fiji Times reports that Mr Powell plans to set up a factory em ploying 70 people to make gar ments for export to New Zealand, Australia ana the US. Mr Powell was reported as saying that other New Zealand firms will go out of business if they do not move offshore.