Global downturn affects PNG’s investment firm

THE recent dramatic global fiscal fears have had an adverse effect on Papua New Guinea’s (PNG) only listed investment company, Kina Asset Management Limited (KAML).

In its third quarter report released yesterday, KAML announced an investment loss of K1.1m or 2.2% attributable to the volatility in the global markets and the Bank of Papua New Guinea pegging which resulted in the valuation loss of its offshore assets.

KAML in a statement released through the Port Moresby Stock Exchange yesterday stated that during the quarter, the Board had approved the inclusion of domestic fixed income as a new asset class. This would allow the company to amass Government Inscribed Stocks (GIS’s) which offer attractive yields of above 10% while also providing cash inflows through regular coupon payments.

KAML’s chief executive officer and managing director Syd Yates confirmed that the company has also sold its entire international share holdings in ‘MSCI All Country Asia ex Japan’ index fund, positioning it to make investments in the domestic fixed income instruments as such the GIS’s.

Mr Yates stated that KAML would continue to review the company’s investment exposures to Global Fund ex Australia" as well as Australian Security Exchange equities adhering to its long term investment strategy offering optimal, risk adjusted performance to its shareholders.

Commenting on the latest economic developments and trends Mr Yates said the GDP growth is expected to increase to double digits year-over-year in 2015 due to the impact of the PNG LNG Project with inflation rising to c.8%.

"PNG Kina (PGK) is expected to normalise and likely depreciate over the next 6 months depending on BPNG’s ability to maintain target FX rate and level of FX reserves (c.U5$2.5b) or over K6.3 billion", he said.

Further, he noted that domestic cash and fixed may see long term rates rise but at a muted rate compared to the past 6 months with a possible increase in short term rates as the government resorts to short term borrowing.

Commenting on the international scene, the CEO indicated that there was a positive outlook for economic growth but not without risks arising from geopolitical tensions and health concerns in light of Ebola outbreak. He further stated that commodities such as oil and gold were expected to remain flat at current levels and possibly decrease in 2015.

During the quarter approximately 1,250,776 KAML shares were traded at an average price of K1.07. As at 30 September 2014, KAML recorded an NTA of KO.98 and last traded at K1.07.

Mr Yates also confirmed that KAML’s largest shareholder Monian had made an offer to increase its holdings to 25% of the company’s total shares on issue and at present an external advisor was assessing the offer on behalf of the company.

Meanwhile, several attempts as well as yesterday to get an explanation from BPNG as to why the PGK value is on a declining trend have been so far unsuccessful.

It’s a growing concern for business houses especially foreign owned business who have reported that they are unable to remit funds back to their countries as well as buy other currencies.

Few of those who attempted to remit funds to their countries or for other purposes and transactions were unable to transact, reliably told this newspaper that they couldn’t buy other currencies. ONEPNG/Post Courier
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