Friday, April 20, 2012

PNG investments drop in value as kina rises

Papua New Guinea investments overseas have dropped in value by as much as 20% as a result of appreciation in the kina, The National reports.

Nasfund property at Harbour City…the property market peaking has contributed to slump in profits.-Nationalpic by MALUM NALU
The PNG kina has appreciated against most currencies by 23% in 2011, resulting in a drop in value of overseas investments by the same percentage point.
The public officers’ superannuation fund, Nambawan Super reported this fact when announcing its financial results for the year ending December 31, 2011.
Nambawan Super reported that its investments overseas had contributed negatively to its end-of-year results as did domestic investments in blue-chip companies such as the Bank of South Pacific, which were open to regional competition.
As a result, the fund reported a dramatic drop in profit after tax for the year, dropping by a massive K239 million from K263 million in 2010 to a mere K24 million.
This was reflected in interest credited to members of only 2% compared to 10% the previous year.
The kina’s appreciation has been driven primarily by the liquefied natural gas project and the high demand for PNG exports including the forward sales.
The LNG project has also had similar inflationary effects right across the business and commercial spectrum including domestic prices of goods and services, salaries and the price for accommodation.
Nasfund’s chief executive officer, Ian Tarutia said yesterday the private sector workers’ fund had also been adversely affected and warned contributors not to expect anything “flash” for last year.
Appreciation in the kina is not solely responsible for the dips in performance, it would appear.
Both Nambawan Super and Nasfund report a slackening off in business on the domestic front as well.
A lot of domestic investment is in property and demand for both residential and commercial property had peaked, Tarutia said.
Investment in stock in blue-chip companies were also static as a result of the global economic downturn as well as the fact that most stocks in these companies were held by institutions so that is not much movement in large chunks of stock to be able to determine price movements, Taurutia said.
Nambawan Super’s public statement concurs in part with Taurutia in that “…domestic investments in Bank of South Pacific also contributed negatively”.
Nambawan Super did gain from its investment in Paradise Foods Ltd, South Pacific Brewery Ltd and government bonds, a fact which underlines its commitment to a “diversified portfolio of investments” as the “best long term strategy” to mitigate risks.

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