KFM Weekly Investment Update: Friday, 26 February 2016

Local Market Summary

• Hon Prime Minister Peter O’Neill officially opened a new office for ExxonMobil PNG (EMPNG) and Mobil Oil New Guinea in Port Moresby, alongside EMPNG Managing director, Andrew Barry and MP for Petroleum and Energy, Ben Micah. The office is located at 7 mile and will serve as the company’s headquarters for all its operations within in the country including as operator of the PNG LNG project

• PNG Chamber of Commerce and Industry (PNGCCI) has received technical assistance from China’s Shenzhen delegation in building up the country’s manufacturing and agriculture sector. Particularly the producing of onshore tuna, forestry products and other cash crops will receive this assistance. President for PNGCCI Mr John Leahy said the country has vast marine resources which could potentially supply the Chinese markets

• Nasfund recorded a profit of K150.9m in 2015, down by 41.6%, compared to K258.5m achieved in 2014. Chairman, William Lamur said the results were positive in yet another challenging year for the country. Mr Lamur said apart from the El Nino phenomenon and shortage in foreign currency, the oversupply in commercial property market and the lack of a secondary market for fixed interest securities resulted in valuation losses in equities and bonds for the Fund

• In addition, the Nasfund Board approved a crediting rate of 4%, equating to over K144m to be paid to members’ accounts for 2015. The Board also announced an additional K75m (or 1.9%) or members’ funds would be held in reserves as a matter of prudency. Meanwhile, membership increased to 515,535 from 488,346 (or 5.6%) in 2015

• Air Niugini Chairman, Sir Frederick Reiher said the airline signed a deal to purchase 737 MAX-8 aircraft worth K1.3bn from a US aircraft manufacturer, Boeing and delivery is set to start in 2020. The airlines’ current fleet includes Next-Generation 737 and 767 300ER and the new aircrafts will allow the carrier to increase its flight frequencies and expand its routes around the world

• Oil Search achieved a core profit of US$359.9m (K1, 032.1m) in 2015, compared to US$482.8m (K1, 384.57m) in 2014. The result was achieved amid one of PNG’s most challenging years in recent history for the oil and gas industry. Annual production of 29.3mmboe was the highest in the Company’s history supported by strong performance from the PNG LNG project and solid contribution the company’s operating fields in PNG. Managing Director, Peter Botten said despite strong operating results from their key assets, Oil Search is clearly not immune to low oil and gas prices but remains confident in its position for 2016

• Kina Securities announced net profit of K47.5m for 2015, 4.9% above its prospectus forecast of K45.3m, after its dual listing on Port Moresby Stock Exchange and Australia Securities Exchange in July 2015. CEO, Mr Syd Yates said the acquisition of Maybank (PNG) was the driver behind the entity’s strong financial result. Furthermore, KSL declared a dividend of A$0.034 per share for the year also exceeding prospectus forecast of A$0.032 per share

• This week’s BPNG auctions in Central Banks Bills were offered for 28 days and 63 days only, with an oversubscription of K625.0m out of a total of K492.5 on offer. The weighted average yield was 1.2% and 2.3%. KFM expects short term rates to remain flat around current levels

• This week’s BPNG auctions in Treasury Bills were oversubscribed by K455.8m out of a total K345.1m on offer indicating strong appetite for the short term securities. The weighted average yield for 91 days was 2.8%, 182 days was 4.7% and 364 days was at 7.7%

• The KSi Index ended the week lower by 0.8% to close at 3,343.94 points, underpinned by a fall in share price of Oil Search (-1.3%), the KSi Home Index was also down by 2.3%, due to fall in share price of Credit Corporation (- 16.7%), to end at 9,126.80 points

International Market Summary

• Officials from the Group of 20 (G20), an international forum for governments and central bank governors from 20 major economies, gathered for a 2-day meeting in Shanghai today as markets hope for positive policy response to deal with market volatility in commodities and currencies brought on by fears around global growth

• The dollar edged down today but was still on track for weekly gains against its major counterparts, as investors focused on the two-day Group of 20 nations’ currency and economic talks that kicked off in Shanghai. The AUD was up 1.5% against the USD while PGK dropped 0.2% against the dollar

• Asian stocks saw positive but guarded gains for the day but not enough to pull through over the week. Nikkei was up 1.4% while Shanghai was down 3.2% and Sensex down 2.9% for the week

• Crude oil price rallied 6.4% for the week as talks of top oil producers including Saudi Arabia and Russia started talks of possibly freezing output to support oil prices. While traders remain sceptical of the effectiveness of a production freeze especially with Iran dismissing the initiative as a joke (Refer chart)

•PGK/USD remained unchanged for the week at 0.3290 while PGK/AUD fell by 1.5% to close at 0.4553 caused by an increase in the AUD/USD, up 1.5% to close at 0.7226

pdfKFM Weekly Investment Update: Friday, 26 February 2016

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