The JMP Weekly Report with Chris Hagan

28 May, 2024

Hello and welcome to this week’s JMP Report,

A technical issue with the website delayed the publication of this weeks report. Apologies.

On the equity front last week we saw 4 stocks trade on the local market. BSP traded 312 shares, closing 1t higher at K16.82. KSL traded 230,567 shares, closing 4t higher at K2.96, STO traded 346, closing 1t lower at K19.37 and CCP traded 228,151 shares, closing steady at K2.16.

WEEKLY MARKET REPORT | 21 May, 2024 – 25 May, 2024

STOCK

QUANTITY

CLOSING PRICE

BID

OFFER

CHANGE

% CHANGE

2023 INTERIM

2023 FINAL DIV

YIELD %

EX-DATE

RECORD DATE

PAYMENT DATE

DRP

BSP

312

16.82

16.83

–

0.01

0.06

K0.370

K1.060

8.87

TUE 27 FEB 2024

WED 28 FEB 2024

FRI 22 MAR 2024

NO

KSL

230,567

2.96

2.96

–

0.04

1.35

K0.097

K0.159

8.82

TUE 4 MAR 2024

WED 6 MAR 2024

MON 15 APR 2024

YES

STO

346

19.37

19.37

–

0.01

-0.05

K0.314

K0.660

5.04

MON 26 FEB 2024

TUE 27 FEB 2024

TUE 26 MAR 2024

–

NEM

–

145.00

145.00

–

–

0.00

–

USD 0.250

0.63

MON 4 MAR 2024

TUE 5 MAR 2024

WED 27 MAR 2024

–

KAM

–

1.25

1.30

–

–

0.00

K0.12

–

–

–

–

–

YES

NGP

–

0.70

0.69

–

–

0.00

K0.03

–

–

–

–

–

–

CCP

228,151

2.16

2.20

–

–

0.00

K0.110

K0.131

6.21

FRI 22 MAR 2024

WED 27 MAR 2024

FRI 19 APR 2024

NO

CPL

–

0.79

–

0.79

–

0.00

–

–

–

–

–

–

–

SST

–

45.00

–

50.00

–

0.00

K0.35

K0.60*

1.33

WED 24 APR 2024

FRI 26 APR 2024

FRI 26 JULY 2024

NO

Dual Listed PNGX/ASX stock

BFL – 6.25 – 15c

KSL – 925c -2c

NEM – 62.51 -1.31

STO – 7.67 +12c

 

Interest Rates

In the 7-day money we saw the Bank take out 2.3bn 7day money, which was approx. 400 mill down on last weeks auction. The Bank has held the rates at 2.5%. In the TBill market, 364-day Tbills rose slightly to 3.88%, up from 3.84% the week before. The market was well bid volume wise with the Bank receiving 106mill over the offer, but the Bank only issued a further 21mill and did not meet the long tail of bids.

In the long end, we saw this month’s GIS auction weakening across the board with rates drifting out slightly. The overall auction was undersubscribed by 87mill which leaves the 2024 debt program undersubscribed by 600mill. This will have a further weakening effect on the rates as the year continues.

In the finance company money, Fincorp and Credit Corp lead the 12-month rates at 2.35%. I am sure a phone call will achieve a better rate.

 

Other Assets we like to monitor

Gold – $2,334 +$81

Silver – 30.34 – +1.09

Platinum – 1028 -$57

Palladium – 966 -$54

Bitcoin – 68,529 +3.38%

Ethereum 3,846 +25.15%

 

---

What we have been reading

Currency Crisis

Article by Dikshita Jain: Reviewed by Madhuri Thakur

What is the Currency Crisis?

A sudden and significant drop in the value of a country’s currency (dollar, rupee, yen, etc.) is called a currency crisis.

Although currency crises have occurred throughout history, the term “currency crisis” became popular during the 1990s when several economies across the world were failing.

This crisis starts when people start losing confidence in their country’s currency and start exchanging their currency for other ones. This loss of trust means that people believe that their currency’s coins or notes might lose their worth. This can happen for multiple reasons, like if a country’s government has a lot of debt and is struggling to pay it back or if there is increasing inflation.

Due to the sudden and rapid disposition of a country’s money, its value drops quickly compared to other currencies. As the currency value falls, imports become more expensive. This causes the prices of everyday items like food and clothes to rise. Businesses might also struggle because they have to pay more for materials from other countries. Such a crisis can make things pretty tough for a country’s economy and the people living there, causing unemployment and making it harder for the government to manage the country’s money.

Table of Contents

• Meaning
• Examples
• Models
• Causes
• Prevention

Key Highlights

• A currency crisis occurs when a country’s currency loses a significant amount of its value, typically over a short period.
• It leads to economic instability and unemployment.
• Some of the major causes are a high inflation rate, excessive government debt, trade deficit, speculations, and political unrest.
• A government can implement measures like float exchange rates, foreign reserve management, and trade balance management.

Examples

Example #1: Asian Financial Crisis (1997-1998)

The Asian financial crisis began in Thailand in mid-1997 when the Thai baht’s value dropped drastically due to high foreign debt. This crisis further spread to other East-Asian economies like South Korea, Indonesia, Malaysia, and the Philippines. Currencies in these countries lost their value rapidly against the US dollar, triggering economic turmoil. Some major issues included:

• Thailand: The Thai baht lost around 50% of its value against the US dollar in just a few months.
• South Korea: The Korean won depreciated by more than 50%, leading to a bailout from the International Monetary Fund (IMF).
• Indonesia: The Indonesian rupiah experienced a significant devaluation, leading to social and political unrest in the country.

Example #2: The Argentine Crisis (2001-2002)

In the early 2000s, Argentina was struggling with high levels of public debt and economic recession. Additionally, the Argentinian currency rate was pegged to the US dollar. Pegging a currency refers to tying its value to another currency, establishing a fixed exchange rate between the two.

This fixed exchange rate became unsustainable, causing the Argentinian currency peg to collapse in 2002. As a result, the value of the Argentine peso dropped to around 70%, causing widespread unemployment, poverty, and social unrest.

Example #3: The Turkish Lira Crisis (2018-2019)

Turkey faced a currency crisis in 2018 when the Turkish lira lost nearly 30% of its value against the US dollar within a short period. High inflation rates, reaching over 25% annually, added pressure on the economy.

These crises resulted in severe economic issues, currency devaluations, high inflation, increased unemployment, and social unrest, showcasing the devastating impacts of currency crises on countries and their populations.

Models

Indicators of a currency crisis can be presented in the following three stages:

1. First Generation
   The gold rates start fluctuating at this stage due to stock market changes. This causes shifts in the Forex market. These shifts may worry the investors, but they stay after the government ensures fixed exchange rates.
2. Second Generation
   This is the stage where exchange rates begin to fluctuate. Signs include inflation, economic slowdown, policy changes, and rising unemployment. To prevent a recession, the government may sell foreign reserves to stabilize rates.
3. Third Generation
   At this stage, constant exchange rate fluctuations eventually lead to a burst. Balance of payment deficits and banking collapses happen due to heavy reliance on foreign investments. Government loans in foreign currencies increase due to home currency devaluation, forcing the country to devalue its currency, which starts a crisis.

Causes

A Currency Crisis occurs due to the following causes:

1. High Inflation: When prices for goods and services rise rapidly, it decreases the value of money. As a result, people lose confidence in the currency’s purchasing power, leading to a currency crisis.
2. Excessive Government Debt: If a country borrows too much money and struggles to pay it back, it can create doubts about the government’s ability to manage its finances. This, in turn, weakens the currency.
3. Trade Imbalances: When a country imports more than it exports consistently, it leads to trade imbalances. This devalues the currency as there’s an increased reliance on foreign funds.
4. Speculation and Investor Panic: When investors worry about a country’s economic situation, they might sell off their country’s currency. This can cause the currency’s value to drop rapidly, leading to a crisis.
5. Political Instability or Unrest: Uncertainty or conflicts within a country’s political environment can reduce the people’s confidence in the government’s ability to manage the economy, resulting in a currency crisis.

Signs

A currency crisis doesn’t occur suddenly. There are always warning signs indicating that a currency’s value is depleting. Following are those signs:

• Rapid Devaluation: A sudden and significant decline in the value of the country’s currency against other currencies indicates a loss of confidence in the currency’s stability.
• Depleting Foreign Reserves: When a country’s foreign currency reserves drop quickly, it may struggle to support international transactions because its currency is losing value.
• Increased Borrowing Costs: Rising interest rates for government or corporate borrowing due to concerns about the country’s economic situation signals a lack of confidence from lenders.
• Growing Unemployment: A significant rise in unemployment rates reflects economic slowdowns and potential financial turmoil within the country.
• Instability in Financial Markets: Fluctuations and volatility in stock markets, bond markets, or banking sectors indicate uncertainty and investor anxiety about the country’s economic prospects.

Prevention

To prevent the currency crisis, countries can take the below-mentioned steps:

1. Float exchange rate: It allows exchange rates to adjust gradually to reflect economic conditions instead of rigidly fixing them. This can reduce the risk of sudden devaluation. Thailand took this step to overcome the currency crisis in 1997.
2. Sound Economic Policies: Governments should Implement correct fiscal and monetary policies to maintain a stable economy, control inflation, and manage government debt responsibly.
3. Foreign Reserves Management: Another preventive measure is to build and maintain adequate foreign currency reserves. This helps support the national currency’s value and manage potential crises.
4. Strong Institutions: Ensuring transparent and credible institutions, including central banks and regulatory bodies, leads to investor confidence and stability.
5. Trade Balance Control: Countries should manage trade balances by promoting exports and reducing import dependency. This leads to balanced trade relations and the prevention of large deficits.

Final Thoughts

Not being in excessive debt doesn’t guarantee the prevention of a currency crisis. A country will have to take a lot of proactive measures to ensure the prevention of a currency crisis.

Frequently Asked Questions (FAQs)

Q1. What happens during a currency crisis?
Answer: During a currency crisis, the government might be forced to sell its foreign exchange reserves. They might also need to increase domestic interest rates to increase the currency value.

Q2. What will be valuable if an economy collapses?
Answer: During an economic collapse, precious metals like gold can be valuable. This is because these metals hold their worth even when money loses its value.

Q3. How do you survive the currency crisis?
Answer: To survive a currency crisis, the simplest thing to do is reduce expenses and purchase only essential items like food. People can also purchase valuable items like gold or other stable currencies for something equivalent to their currency’s worth. Budgeting carefully, finding ways to earn or trade for what’s needed, and seeking government support or community help is essential.

Recommended Articles

We hope this EDUCBA article about the currency crisis benefits you. If you need any further guidance on economics-related topics, check out these EDUCBA-recommended articles:

1. Economic Recession
2. Economic Collapse
3. How to Support Employees during Crisis
4. Economic Risk

Thank you to Educba for this article

 

---

 

Norway’s $1.7 Trillion Wealth Fund Asks Shell for Climate Strategy Disclosure

Mark Segal May 20, 2024

Norges Bank Investment Management (NBIM), the investment manager for Norway’s $1.7 trillion oil fund revealed that it has asked Shell to provide more detail into its mid-term climate strategy, although the fund also announced that it will vote against a shareholder resolution calling for the oil giant to set a goal to reduce emissions from the use of its products.

The statement, released by NBIM with its voting plans disclosure for the upcoming Shell AGM this week, follows a series of changes announced by Shell earlier this year to its energy transition strategy under new CEO Wael Sawan. While the new strategy included the company’s first interim target to reduce emissions from the use of its oil products, it also eliminated a 2035 emissions intensity goal, and revised down its interim 2030 intensity reduction goal to 15% – 20%, from its prior 20% target.

 

NBIM was established to manage revenues from Norway’s oil and gas resources. The fund has grown to one of the world’s largest, owning nearly 1.5% of all shares in the world’s listed companies, with holdings in nearly 9,000 companies in 70 countries.

In 2022, NBIM released its climate action plan, which included a target to reach net zero emissions for all companies in the fund by 2050, and a pledge to set climate-related expectations for companies in its portfolio, including a requirement to set net zero goals. The fund published its climate-related expectations for portfolio companies last year, which included requirements to disclose value chain emissions, report on climate risks, and implement transition plans.

In its voting plan disclosure prior to the Shell AGM, NBIM reiterated its expectation for interim and net zero targets, and added that its has “encouraged Shell to make additional strategy disclosures that could reduce uncertainty about the company’s direction in the mid-2030s.”

Shell has faced pressure from environmental and shareholder groups to set interim value chain emissions reduction targets, including the filing of a shareholder resolution this year by a group of 27 institutional investors representing more than $4 trillion in assets under management, led by oil and gas-focused shareholder activist group Follow This, urging the company to set a Paris Agreement-aligned medium-term target to reduce emissions arising from the use of its products.

The resolution calls on Shell to align its medium-term target for reductions in Scope 3 emissions from the use of its energy products with the goal of the Paris Agreement, which aims to limit global warming to well below 2°C, and to pursue efforts to limit the temperature increase to 1.5°C. The resolution also states that it leaves the strategy for achieving the targets up to the board of the company.

Follow This led a group of shareholders last year in filing a similar resolution, which received 20% support at Shell’s 2023 AGM. The updated resolution incorporates key changes, including replacing last year’s “2030 target” with a less prescriptive “medium-term targets,” and a rewritten supporting statement focused solely on emissions.

While acknowledging that “Shell’s Energy Transition Strategy has evolved under the new CEO,” however, NBIM indicated that it will vote against a shareholder resolution, based on its belief that the updated strategy “sufficiently retains the core components of a Paris-aligned transition plan.”

Following the release of NBIM’s voting plans, Follow This criticized the wealth fund’s decision. In a statement released by the group, Follow This founder Mark van Baal said that the decision puts NBIM’s “climate credibility into question.

Van Baal added:

“NBIM’s ‘belief’ that an oil and gas company that will not reduce its total emissions this decade is Paris-aligned is remarkable.

“Luckily, more and more investors base their decisions on science and take leadership by co-filing and voting in favour of climate resolutions. NBIM will follow their leadership one day.”

 

---

 

The Road Ahead for ESG

ESG Today Guest Post May 20, 2024

By: Michelle Dunstan, Chief Responsibility Officer, Janus Henderson Investors

 

Responsible investing, or considering financially material Environmental, Social and Governance (ESG) factors in investing has reached an inflection point.  During the last few years, “ESG” has faced increased scrutiny, misunderstanding, and controversy enroute to becoming a political flashpoint in some parts of the world.  Despite this shifting narrative, governments across the globe continue to work toward solving key global issues with policies designed to mitigate emissions, improve water security and land use, enhance cybersecurity and more.  These efforts inevitably create headwinds and tailwinds for a wide range of stakeholders, underscoring the importance of integrating material factors into investment research to inform decisions.

At the core of ESG integration is the premise that understanding securities from a traditional fundamental analysis and an ESG financial materiality analysis provides a better, more complete perspective on the outlook of an issuer in terms of risk and return: its long-term cash flows, valuations, or discount rates.  If a development has the potential to impact the long-term performance of a publicly traded company, investors are best served by taking the time to understand it and evaluate how it might impact share or bond price movements going forward.  This research ultimately leads to better-informed investment decisions and risk management.

 

Despite this link to value creation, investor preferences continue to evolve – creating a ripple effect that promises to shape the road ahead for all stakeholders.  Following are three takeaways on investor preferences from Janus Henderson’s 2023 Investor Survey:  Insights for a Brighter Future that will shape the road ahead for ESG.

• Gender Gap Emerges – According to the survey findings, 60% of female investors think incorporating environmental or social responsibility factors into their investments is important compared to 48% of men.  In light of recent research from McKinsey & Company revealing that total US household financial assets controlled by women is expected to grow from $10 trillion today to $30 trillion by 2030, the future of responsible investing will likely look very different in the future than it does today.  As wealth shifts into the hands of US women over the next decade, asset managers and wealth management firms will adapt to better meet the unique preferences and investment objectives of female investors. 
• Knowledge Matters –Notably, our survey also revealed that investors working with a financial advisor are more likely to think incorporating environmental or social responsibility factors into their investments is important (60%) than those who do not have a financial advisor (43%).  Given the pace of product development and the uptick in green-washing accusations, it’s not surprising that investors with access to professional financial advice and education are more likely to have a favorable view of the investment strategy.  This finding also speaks to the importance of asset managers working in partnership with advisors to deliver both well-crafted investment solutions that deliver on both financial and other goals and practical educational content to enhance the due diligence process.
• Generational Divides – Finally, our survey also found that the majority of millennials (82%) and members of Gen X (66%) believe incorporating environmental or social responsibility factors into their investments is important compared to 41% of Baby Boomers and 36% of the Silent Generation.  Given this strong correlation between age and views on ESG investing, it appears recent backlash may one day be looked back on as a temporary setback.  Study after study has shown younger investors to be early adopters of responsible investing, and as these investors age and amass greater wealth, their influence will grow along with their imprint on the financial services industry – a trend that also suggests that ESG preferences will look very different in the next decade.

Responsible investing appears to have reached a crossroads in the US as an evolving regulatory landscape, coupled with political backlash, has elevated concerns surrounding the future.  However, as demonstrated by the Inflation Reduction Act of 2022, which sets aside over $300 billion for investments in clean energy and rules released by the Environmental Protection Agency (EPA) in 2024 that push the auto industry toward majority EV sales by early next decade, sweeping changes are underway that will have implications for publicly traded companies and their investors. 

These changes, coupled with demographic shifts impacting the future of wealth management, suggest the link between ESG integration, value creation, and shareholder demand will not be lost. 

---

I hope you have enjoyed the read, if you would like to find out more about investing in the PNG Financial Markets, please feel free to reach out to me.