The Papua New Guinea Securities Commission has placed a new levy for all trades on the PNG Stock Exchange, the country's stock market (PNGX).
The Securities Commission adopted the new levy on February 8 and it went into effect on March 8, according to PNGX chairman David Lawrence. Each buyer and seller are expected to pay an extra 0.75 per cent of the sale value to their stockbroker.
He said that the stockbroker was required to pay the money to PNGX on a monthly basis and that PNGX was then required to pay the money to the Securities Commission on a monthly basis.
PNGX was worried that the levies would disincentivize business competition at a time when it was attempting to build it up from a low base, according to Lawrence.
Buyers and sellers, he added, were immune to paying the levies for on-market purchases.
“We have also heard that some buyers and sellers are giving consideration to off-market transfers of listed securities rather than executing orders through the market, as off-market transfers will not be subject to the levies,” he said.
PNGX has urged the Securities Commission to notify the public of its plans to reclaim any outstanding levies from investors and sellers, as well as its views on off-market transfer activities, according to Lawrence.
“PNGX is concerned that the imposition of the levy at this time is counterproductive to the development of the capital markets in PNG and not aligned with the Government’s financial sector development strategy (FSDS) to create an environment that is equal in its competitiveness to the ASX,” he said.
He expressed concern about the possible impediments generated by the levy, which he defined as follows:
- Both Investors' trader fees will be increased. This would have a negative effect on investment returns, particularly superannuation investors.
- It would also give other more developed foreign markets in the area and more established international markets an unexpected competitive edge.
- Detract from Papua New Guinea's investability;
- Encourage PNG-incorporated businesses to list on existing foreign exchanges with lower sovereign risk;
- Encourage the expansion of "off-market" transactions, decreasing the disclosure, pricing, openness, and investor rights inherent in the formal, controlled PNGX market, to the detriment of PNG's domestic and international investors.
According to Lawrence, the outcomes could decrease competition in an already illiquid sector, eliminate incentives for market development, and raise the cost of financing for PNG companies and the government.
