STOCK PRICES FALL, BUT DOMESTICS ADD CONFIDENCE

2013 was a mixed year for PNG stocks. The Kina Securities Index fell by 14.9% over the year, but was largely influenced by the massive fall in value of the dual-listed Newcrest Mining, the largest company on the Port Moresby Stock Exchange (POMSOX). The Kina Securities Home Index, which excludes overseas stocks, fell only 2%. Dominic Beange, Investment Fund Manager with Kina Funds Management, says New Britain Palm Oil shares had one of the most turbulent years on the exchange. Its major shareholder, Malaysian company Kulim, had hoped to increase its holding from 50% to 70%. However, the PNG Securities Commission stepped in to block the purchase. The shares fell below both the offer price, and the pre-offer value, ending the year down 11.8%. ‘Truly domestic companies had a pretty good year,’ Beange said, adding that the beginning of LNG production in this year would most likely improve related international stocks in 2014. Geoff Mason, general manager of POMSOX, says the exchange is hoping to further expand its reach over the next 12 months. As well as encouraging new listings— Niuminco Group and Indochine Mining—he is also hoping to see a wider range of investors parking their funds with the exchange in 2014. He says POMSOX is looking at domestic sources of capital in particular, with many local landowner and village groups looking to invest mining royalties and other community funds.

'It’s like having a whole lot of small investor clubs around the country. They can get a good return by investing their pooled funds into the market.’ International emerging market funds are also being targeted; with Mason saying the lower-priced kina is giving international investors a cheaper entry into PNG stocks. ‘PNG is still a frontier market, primarily for those who are prepared to step outside the mainstream markets. There is reluctance among international investors to invest due to an over-perception of risk,’ says Richard Borysiewicz, Group General Manager at BSP Capital. ‘However, the huge amount of press Exxonmobil, Oil Search, and Interoil are receiving is sharpening focus on this market.’