PNGX (formerly known as POMSoX) is proposing to establish a new PNGX debt market for trading of government and private sector debt securities which will operate alongside the existing PNGX equity market.
Earlier this year, the PNG Government launched the Financial Sector Development Strategy (FSDS). The FSDS recognises that a key building block to redeveloping PNG’s capital markets is the development of a secondary market in government securities. Once progress has been made on that, attention can turn to the steps needed to further develop the secondary market in private sector debt securities and equity securities.
The FSDS seeks to make Port Moresby at least as attractive a centre for PNG firms to raise debt and equity capital as is Sydney. It acknowledges the competitive advantages of PNG in that firms can achieve greater visibility and investor interest locally than in Australia, the “home bias” of PNG investors and the absence of currency risk by PNG investors investing in PNG.
PNGX has been working closely with the Bank of Papua New Guinea (BPNG) on the establishment of a secondary market for PNG Government and BPNG debt instruments.
PNGX has also been working with the International Finance Corporation (IFC) on the establishment of a primary private sector debt securities market for PNG, incorporating key principles of the framework developed through IFC’s technical work and stakeholder consultations. IFC’s work with BPNG upgrading the central securities depository framework for debt securities will further leverage PNGX’s capital market development objectives.
It is proposed that, subject to the Capital Market Act 2015, the government debt market and private sector debt market would be accessible to sophisticated and retail investors.
“We are pleased to be closer to delivering on two key elements of the national Financial Sector Development Strategy. Development of a government and private sector debt market is an important building block for the development of the PNG capital markets and a significant development for PNGX,” said PNGX Chairman, David Lawrence.
“Papua New Guinean investors looking to receive a steady stream of income have had a limited range of choices. Government and private sector bonds traded on PNGX will present an attractive alternative.
“A new secondary market for government and corporate debt opens new opportunities for government and business to access domestic debt financing, an important development for mobilizing capital in the PNG economy,” Lawrence added.
PNGX has released draft debt market rules for comment. The comment period runs until 31 July 2019. Copies of the draft rules are available from PNGX.