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THERE is a need to establish a Capital Market Development Authority to oversee development of capital market in the country. Government agents like Central Bank through financial markets and foreign exchange control departments, the Securities Commission and the Port Moresby Stock Exchange, the Investment Promotion Authority and Small Business Development Corporation, merchant and investment banks, stock brokers and Treasury Departments' debt management, economic policy and investment divisions and the Attorney General's Office should be engaged to develop a capital market. The role of market players needs to be emphasised with proper acts and statutes enacted and Securities Commission should be properly staffed to ensure the capital market complies with international best practices standards, audits and good governance. At present the public needs to appreciate the importance and existence of Port Moresby Stock Exchange. Regrettably, investors and the public do not view and appreciate Port Moresby Stock Exchange as a convenient vehicle to purchase shares of listed companies. The public must be convinced to purchase shares of listed companies on the exchange and a secondary market must exist for investors to dispose off their shares at their own convenience. The existence of a vibrant secondary market activity has been absent for a long while. There must also be bidding houses for "would be investors" convenience to enjoy the benefit of submitting their bids to bidding houses/brokers and efficient clearing houses for smooth transfer of funds, giving comfort to investors. At the moment bids are done over the counter in both government bonds and Port Moresby Stock Exchange. Stockbrokers are being "deposit takers" and bidding in their names rather than transferring ownership of stocks upon acceptance of deposits, offers and bids. The Central Bank settlement and transfer of funds is on time payment versus delivery. The question begs in efficiency of our settlement systems and whether there is a need for having an internationally accepted clearing system like Euro clear, Austraclear, etc. The prospect of the debt market seems to be improving with local companies like Milne Bay Air and BSP Capital issuing company notes on the stock exchange. It would be interesting also to note if there was a reasonable appetite for the offers. The governments' role in developing the capital market is complex. It goes far beyond creating statutes for the regulation of security issuances and stock exchanges. In order for public to have confidence that the capital market is run in a fair and transparent manner, government officials must be involved in a continual process of understanding of: * How the market operates * The principal problem areas faced by private companies * The major concerns of potential investors * The variety of forms of financial instruments in the market * The impact of regional and international developments * The relationship between private and public sector financing * The most effective means of enforcements and sanctions Peter Nukunts Port Moresby |
LETTERS
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