Depreciation ‘brings investment’

By PETER ESILA

AS the Kina depreciates, the stock market can appear more attractive to foreign investors because their stronger currencies can buy more shares for less money, according to the PNG Stock Exchange (PNGX).
PNGX chairman David Lawrence said: “As the currency reaches a natural level, FX should become more available, reducing the concerns about investors being able to get their funds out of the country. “Increased buying power and confidence might encourage more foreign investment in the stock market,” he said.
“Companies which are listed on the exchange will benefit from more access to capital.
That, in turn, might influence more companies to list on PNGX.
“The impact of depreciation on stock market investment will also depend heavily on how investors perceive the government’s ability to manage the economy and whether they view the depreciation as a temporary adjustment or a sign of more profound economic troubles.”
He added that a positive aspect of the Kina depreciation was that PNG’s exports would become cheaper and more attractive on the international market.
“This could boost sectors such as agriculture, fishing, mining, and forestry,” he said.
“This increase in the competitiveness of export-oriented businesses means they might see increased revenue from stronger demand, potentially offsetting some of the negative impacts on other areas of the economy.
“The increasing cost of imports could also spur interest in developing local production and manufacturing capabilities as businesses and consumers seek cheaper local alternatives.
“As a result, there might be increased investment in sectors that could potentially replace imports, such as agriculture, light manufacturing and downstream processing industries.’
But he said that government support to develop these capabilities and to support a substantial investment in infrastructure, training and technology, would be required.