The year in review and the year ahead

This week we reflect on 2022 and the events that occurred in the year and look ahead to 2023.

2022 was a challenging year for the global markets. The massive and historic energy shock sparked by the Russian-Ukraine war spurred inflation rates, exhausting the confidence, and purchasing power of households and adding downside risks to the global economy which was still dealing with the Covid19  pandemic.

The local market did not see much impact in terms of the trading patterns on PNGX however impacts of the pandemic and the Russian – Ukraine war were felt in the foreign exchange (FX) market where FX shortage issues continued despite BPNG intervention in Q4  and inflation and living costs remained high throughout the year. The 10^th PNG National Election and election-related violence country-wide and delays in the reopening of the Porgera Gold Mine challenged investor confidence impacting business and investment opportunities in the country.

In review, 2022 was a strong year for the PNGX equities market. The aggregate trade numbers on PNGX (aggregate means totals reported on the market and off the market on PNGX) declined by 0.53% compared to 2021. The aggregate trade volumes took a positive turn with a significant increase of 125% to 48.99 million shares and aggregate trade value increased by 132% to 397 million Kina compared to the 2021 trade results. This indicates increased liquidity and growth in the equities market.  Market capitalization gained 11% to 136 billion kina which was largely attributed by the increase in the share price of stocks and the increase in issued capital.

There was a mixture of gains and losses between the financial and banking & finance sector. Slight losses were seen from the industrial sector while the mining, mining exploration, and oil & gas sectors remained unchanged.

Trades results were reported for 8 out of 12 listed securities while 2 of the 12 listed entities remained suspended throughout the year.

Dividend Payments:

Positive advancements during the year

• PNGX released proposed new Listing Rules for consultation
• PNGX received Securities Commission approval of Debt Market Rules
• PNGX obtained approval from PNG Securities Commission to operate the market
• PNGX and XBourse Australia sign MOU for use of blockchain technology to accelerate Pacific Islands capital markets
• The DEFINE Initiative provided training to the SME sector as part of the UNCDF Rapid Finance Facility Project
• PNGX joined the UN Sustainable Stock Exchange Initiative

The DEFINE Initiative Project was rolled out to support women entrepreneurs in PNG. While the aim was to train 700 women in the SME sector the target was well exceeded with 800 women trained.

2022 was the first year since the merging between Oil Search Limited (OSH) with Santos (STO). Oil Search delisted from PNGX and was replaced by Santos as a foreign exempt entity on 13 December 2021.

Market initiatives to look forward to in 2023 includes the new debt market, introducing modernized PNGX rules, creating new markets and services for SMEs and renewed investor education programs amongst others.

2023 Outlook

While it is difficult to provide an accurate outlook for the future due to the past and ongoing challenges of the Covid-19 virus on the global economy including PNG, there is optimism about the prospects of future planned market activities.  While the global market will remain uncertain owing to the Ukraine-Russia conflict and challenging economic times with higher inflation, there are positive signs for PNG.  There is a strong expectation that the re-opening of closed mines and the development of new gas fields will lift the PNG economy.

There are signs of potential new listings in the next year or two, which would be a significant improvement in activity.  There are also early signs of renewed retail investor interest in the market.

The effect of the controversial super tax on returns to investors from BSP and KSL remains unknown and the market waits to see if dividends will be impacted.

While the market waits to see if the strength of the 14% dividend yield from BSP will be ongoing, it oddly remains a constraint on market liquidity as investors in an already tightly held register, maintain a strong buy and hold position to underpin their long-term portfolios.

Market initiatives to look forward to in 2023 include the new debt market, introducing modernized PNGX rules, creating new markets and services for SMEs and renewed investor education programs amongst others.

PNGX and its market remain strong and safe during these challenging economic times and are well placed to take advantage of opportunities as they emerge in the future.

The information in this article is general in nature and you should take care to inform yourself about the specific characteristics of a particular investment before making a decision to invest in it.  PNGX recommends discussing your investment objectives and needs with a stockbroker or qualified financial adviser.

By following these articles and reading more information available on the PNGX website (www.pngx.com.pg) you can build your wealth and invest in PNG.