PNG: Stock market defies world slump
Updated
The Port Moresby Stock Exchange is showing resilience in the face of world sharemarket volatility, being one of a very few not facing big losses. Fears of a recession in the United States prompted a worldwide slump in share prices early this week. The Australian Stock Market yesterday had its biggest one day fall in 18 years wiping more than 100-billion dollars off the value of listed companies. Overnight action by the US Federal Reserve to cut interest rates has slowed the drop and today there has been a substantial bounce in Australian share prices. Throughout the turmoil the Port Moresby Stock Exchange has remained strong. Last year, it posted overall growth of 32 percent and last week it reached a new record high. The Managing Director of Kina Securities, Sid Yates told Jemima Garrett, that this week's losses have not left the Port Moresby exchange in the red.
Presenter: Jemima Garrett
Speakers: Sid Yates, Managing Director Kina group of companies
YATES: We've been fortunate that we haven't been impacted like the other markets. We're still up three per cent for the year. We did come off. We've come off a couple of per cent from our high about a week ago. But we haven't been impacted thank god.
GARRETT: And are you seeing a bounce back as the Australian Stock Market is seeing today?
YATES: Yeah, it's we're having a little bit of a bounce back. I mean it's not as big as the Australian market, but we seem to sort of trail, follow them on. So hopefully I think in the next day or so, we'll see probably get back up to those record highs we had about a week ago.
GARRETT: Considering what a vulnerable economy Papua New Guinea is, it's perhaps surprising that Port Moresby Stock Exchange has, not just this time, but in the past, not been as vulnerable to these big drops on international exchanges. Why is that?
YATES: Well Jemima, I think that probably the main reason is that we don't seem to have the big overseas investors like the other markets do, so they don't get as scared. But we have a lot more of the local investors who are in there for the long haul, so that always takes out the volatility. But the economy has been in pretty good shape lately. We're having a good year. We're looking at getting about 7 to 8 per cent growth rate. And someone in foreign reserves are really good and PNG's probably never been in a better financial shape. So I mean those sort of things all add to it. And punctually ??? it's because we don't have those overseas investors I think that can cause that volatility.
GARRETT: So the volatility you have seen so far on the Port Moresby Stock Exchange, what will that mean to shareholders and to people in Papua New Guinea who contribute to superannuation?
YATES: Hm, well probably not a lot, unless they were leaving in the near future. But the impact basically will all those super funds invest for the long haul and if they stay in there, and providing the market stays where strong and keeps going, they won't really have too much of an impact at all.
GARRETT: There has been a lot of concern internationally about the state of the US economy. What impact do you expect all of this wider action to have on the PNG economy during this year?
YATES: Yeah, well that's a good point. I mean the US I mean they've got really. The markets consider it their weak earnings forecast going forward. But research stocks which predominantly what Papua New Guinea's doing well on seem to be doing reasonably well. And I mean there doesn't seem to be that impact, providing that the resource sector holds up. Papua New Guinea should continue along and continue in a good position for another couple of years at least.
GARRETT: Are you expecting the resource sector to hold up?
YATES: From our research overseas and from the people that give us the research, it all seems to from the demand from China and India. They expect the resource sector to probably hold up for another couple of years, just simply because the demand for infrastructure, development and resources in those two countries.
GARRETT: Finally, we are seeing a strong rebound on the Australian Stock Exchange today. Do you think that we've seen the bottom of this slump?
YATES: That's a good question. I think it's going to be a hard year. As I said before, it all depends on the weak, the earnings forecast the US companies which we believe are weak. It also it will be interesting to see what happens. I mean we've got all the big reporting season coming up, starting February, March in Australia. So it will be interesting to see what happens then and how they report will probably have a big of an impact on the Australian market.
