KFM Weekly Investment Update: Friday, 20 November 2015

Local Market Summary:

• PM Hon. Peter O’Neill spoke about development and positive changes taking place in PNG to regional chief executives and leading business people at the APEC CEO Summit in Manila. PM provided an insight to the opportunities for businesses in the country and further shared information on the Government’s approach to managing international pressures such as economic slowdown in partner economies and reduced commodity prices

• Trade, Commerce and Industry Minister Hon. Richard Maru has confirmed that the Government has allocated K6.0m to the Peoples Micro Bank in the 2016 Budget to become a commercial bank. He further confirmed that it was the first micro bank to have commercial banking operations

• The National Development Bank CEO Mr Des Yaninen said the five programmes were the establishment of Stret Pasin Stores, the expansion of the young enterprise scheme, expansion of the young entrepreneur start-up loans, establishment of the Urban SME incubation centres and the establishment of portable shops

• BSP Group announced their Q3 2015 performance, with the bank generating a Net Profit after Tax (NPAT) of circa K124.0m, the profit is inclusive of circa K4.1m from newly acquired Cook Island, Samoa, and Tonga. The result was down by 9.0% compared to previous quarter performance which was attributed increase loan write-offs associated within the retail segment. Overall, the Bank generated a year to date NPAT of circa K391.0m compared to K385.0m on the previous corresponding period

• InterOil has reported that logging from a well in Gulf has confirmed an extension of the Elk-Antelope field’s high-quality, gas-bearing dolomite. The well is in the Antelope-4 sidetrack-1 in the Petroleum Retention License 15 in the province. The logs measure 182 vertical meters (597 feet) of dolomite and a vertical gross gas column of about 339 meters (1112 feet)

• Kina Asset Management Ltd (KAML) reported an investment gain of K0.5m or 1.0% for the third quarter. The modest gains were a result of Chinese growth concerns, indications of monetary policy tightening in the United States and the residual effects of sustained low commodity prices. Chairman Sir Rabbie Namaliu said that despite the subdued Q3 results, KAML has recovered; generating an year-to-date investment gain of K4.0m or 8.0%

• Comrade Trustee Services Limited (CTSL) hosted the ground breaking ceremony for the Defence Force Housing Scheme, Toea homes last week Friday. Defence Minister Dr Fabian Pok stated at the ceremony that the time was right to establish a home ownership scheme to support an increasing Defence Force. Dr Pok said that the housing project will see 1,700 homes built, 1,000 at Taurama and 700 at the Igam Barracks in Lae. He added that the subsidiary company Toea Homes Limited will undertake the development, providing affordable homes for their service members

• This week’s BPNG auctions in Treasury Bills and Central Bank were oversubscribed by K73.4m and K40.0m respectively out of total K712.0m on offer indicating increased appetite for short term securities .The weighted average yield for TBills 182 days was 4.6% while 364 days was at 7.5%. The CBills weighted average yields were at 1.4% for 28 days, 2.4% for 63 days and 2.5% for 91 days. KFM expects rates to remain around current levels as supported by subdued outlook for inflation

• This week’s auctions in Government Inscribed Stock were undersubscribed by K106.0m out of K160.0m offered. The weighted average yields were at 9.8% for 2018 series, 11.0% for 2020 series 11.2% for 2022 series and 11.9% for 2023 series. KFM expects long term rates to see a flat to marginal increase in the next six months

• The KSi Index ended the week up by 0.5% to close at 3,567.51 points, underpinned by an increase in the price of energy stock Oil Search Ltd (OSH) which was up 0.9% while the KSi Home Index was also up by 0.9%, caused by a slight recovery in the share price of banking stock BSP, to end at 9,655.41 points

International Market Summary:

• Minutes from the US Fed’s October meeting released this week showed most officials rallied behind a possible December rate hike. ‘We have done everything we can to avoid surprising the markets and governments when we move’, said Fed Vice Chairman Stanley Fischer in prepared remarks for a conference sponsored by the San Francisco Fed

• Australian shares ended the week on a wobbly note but still cap a strong gain for the week, with the S&P/ASX 200 adding 4.0% over the five sessions, with the big banks, Telstra and Wesfarmers accounting for a big share of the rally (refer to graph)

• European stocks rose despite expectations that the US Federal Reserve would raise interest rates next month. The FTSE EuroFirst 300 rose 0.4% to 1,502.3, more than recovering the previous day’s slip but ending well short of an earlier three-month peak of 1,513.7

• Asian stocks were mixed on Friday, capping off an otherwise positive week in which investors have becoming increasingly resolved to the likelihood of a December rate rise from the US Federal Reserve. Japan’s Nikkei 225 ended the week higher by 20.0 points or 0.1% to close at 19,879.8 after US stocks declined and the dollar weakened against the yen as investors begin to grapple with higher borrowing costs expected to follow the US Federal Reserve’s December policy meeting. The Nikkei dipped 86.2 points or 0.4% to 19,773.6

• PGK/USD remained unchanged for the week to end at 0.3395 while PGK/AUD dropped by 0.9% to close at 0.4721 for the week caused by a pick-up in AUD/USD, up 0.9%, to close at 0.7191

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pdfKFM Weekly Investment Update: Friday, 20 November 2015

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