behavior and commitment to the market. Those rules are called the Listing Rules.
The Listing Rules typically include requirements for a certain size and quality of the company to be listed. The underlying financial viability of the company is also important. All exchanges establish standards in their Listing Rules as a means of maintaining integrity, reputation, and visibility.
When companies request listing they have to satisfy PNGX that they meet the listing requirements. The high visibility and liquidity that a company gets by listing is strong incentive for the company to meet the listing requirements.
The existing PNGX Listing Rules were introduced in April 1999 and were closely based upon the Listing Rules of the Australian Stock Exchange. They were last amended in November 2012.
Last week PNGX released a proposed new set of Listing Rules for consultation.
Why is this important?
The proposed Listing Rules are the first major review of the PNG market in over 30 years.
The Listing Rules are the design specifications of the market. They are like the design specifications of a car. The specifications can be for a large, medium or small car. If the design is for a large car, and all the parts fit together and work well, the car will be attractive to buyers of large cars and will perform well for a large car user. Also, the needs of a large car user will differ from the needs of a small car user. But what is also relevant is that the design of a 1990’s car may not suit the needs of a 2020’s buyer.
In the case of the current listing rules, they are designed for large companies, but the design is for a 1990’s market. So, they need trading-in and replacing with something more suited to the 2020’s. If they are designed correctly, they can be attractive to more companies, encourage raising of new capital and increase the size of the market.
Importantly, the consultation paper which PNGX released also mentions that new markets are being developed to suit different users in Papua New Guinea. In the same way as you have large, medium and small cars, PNGX is proposing markets for large, medium and small companies. This is because the needs of medium and small companies are different to the needs of large companies. Also because some investors want the opportunity to invest in SMEs. Markets for medium and small companies will be important for helping SMEs get access to funding to support their growth. The DEFINE Initiative (www.define.pngx.com.pg), which PNGX is supporting, is a first step towards these new markets. The proposed rules released last week are for large companies.
The design of new Listing Rules for large companies also must recognise that a significant portion of the PNGX market is dual listed on ASX. This requires balancing the needs of local-only companies with the needs of dual-listed companies to minimise their compliance costs and reduce the risk of them leaving the PNG market totally. This is also why the development of new markets for SMEs is so important.
Another key part of designing a capital market is promoting investor confidence in the governance of listed companies. PNGX and PNG investors have an interest in high standards of corporate governance practices by the Boards of companies in which they invest. The proposed rules refer to PNGX Corporate Governance Standards which will set requirements for reporting corporate governance practices. These standards are presently under development with the assistance of the International Finance Corporation and will be made available for comment shortly.
The Listing Rules and Corporate Governance Standards are an important part of the exchange’s measures to enhance the credibility of the market and protect the interests of its investors.
A copy of the consultation paper is available on the PNGX website (www.pngx.com.pg) under Downloads – Regulations.
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. In PNG, you can either contact JMP Securities Limited (enquiries@jmpmarkets.com) or Kina Securities Limited (wealth@kinabank.com.pg).
By following these articles and reading the information available on the PNGX website (www.pngx.com.pg) or following PNGX on LinkedIn or Facebook you can learn more and build your wealth by investing in PNG.
