KFM Weekly Investment Update: Friday, 04 December 2015

Local Market Summary:

• The Asian Development Bank (ADB) reported that PNG is facing lower growth and tighter fiscal conditions sparked by lower commodity prices in its recent Pacific Economic Monitor analysis (December 2015). The report highlighted challenges that PNG is facing in financing its 2016 budget deficit. Furthermore, ADB economists stated that foreign exchange reserves are likely to continue falling (from $2.0bn in September 2015)

• The Investment Promotion Authority with the help of the ADB has reviewed the Personal Property Securities Act (PPSA) with the aim of making lenders and creditors trade in a properly regulated environment. The objective of the PPSA is to make it easier for people to pledge “movable properties” as collateral loans in order to increase access to credit and overall economic activities

• City Pharmacy Group (CPL) CEO, Ravi Singh said that CPL performed well despite some challenges this year especially in July when the new Waigani shopping complex was damaged by fire. Singh went on to add that they are optimistic of another successful operational year in 2016

• Porgera Gold Mine operator, Barrick Niugini’s Executive Managing Director, Greg Walker said that they are expecting 8.0% increase in production in 2016 amid low commodity prices by focussing on reducing costs and increasing efficiency on underground operations. Barrick Niugini has entered a joint venture with Zijing Mining from China which will bring new skills to the PJV and will continue to strengthen their operating performance

• The Board of Credit Corporation PNG (CCP) resolved to discontinue the on market Share-Buyback program which expired today. CCP shares closed at K2.5 per share in 2014 and have since dropped 11.5% to K2.3 per share

• The National Executive Council has recently endorsed PNG’s membership to the International Cocoa Organization (ICCO) and the signing of the International Cocoa Agreement (ICA) 2010. Prime Minister, Hon Peter O’Neil said that PNG’s membership to the ICCO is critical to the growth and development of cocoa; the third largest export commodity contributing significantly to the country’s export earnings

• CEO of Trukai Industries Limited, Greg Worthington announced the company has signed a rice development and purchase agreement with rice farmers in Oro as part of their commitment to sourcing local grown rice as part of its processing plan. Worthington said the agreement outlined the support Trukai would provide on training, seeds, rice innovations, quality standards and information to enable rice farmers in the province to grow rice that met processing standards

• Minister for Public Enterprises and State Investments, Hon Ben Micah launched Kumul Consolidated Holdings this week which is to replace the Independent Public Business Corporation structured under a new Act of Parliament to facilitate government commercial business and engage more effectively in developing the economy

• This week there was no offer of Central Bank Bills hence the weighted average yields remain flat at 1.34% for 28 days, 2.34% for 63 days and 2.52% for 91 days

• This week’s BPNG auctions in Treasury Bills were under-subscribed by K120.5m out of the K480.0m on offer which included a new 28 days TBill offer amounting to K100.0m. The weighted average yield for 28 days was 1.44%, and the rest largely unchanged with 63 days at 2.39%, 91 days at 2.58%, 182 days at 4.59% and 364 days at 7.51%

• The KSi Index ended the week down by 0.1% to close at 3,562.6 points, underpinned by a fall in the price Bank of South Pacific (BSP) which fell 0.7% to K7.45 and Kina Securities Ltd (KSL) which fell 3.7% to K2.6. The KSi Home Index was down 0.5% for the week at 9,652.7 points

International Market Summary:

• The European Central Bank (ECB) disappointed market hopes for greater stimulus by cutting its rate, causing a spike in the Euro and hence forcing investors to shift positions which affected many asset classes

• US and European stocks closed down sharply on Thursday and the euro enjoyed its biggest one-day percentage rise in well over six years in reaction to ECB rate cut. The S&P 500 was down 1.9% for the week at 2049.6 points while the FTSE 100 was down 1.6% at 6,275.0 and DAX and CAC 40 indices were down 4.5% at 10,789.2 and 4.1% at 4,730.2 respectively (refer to chart)

• Heavy selling in the US dollar (USD) against the rallying euro saw the dollar lose ground against major currencies this week. EUR/USD was up 3.3% to 1.0938, GBP/USD was up 0.6% to 1.5127 and AUD/USD edged 1.7% upwards to 0.7318

• PGK/USD closed for the week 0.7% lower at 0.3350 reflecting the continued shortfall in liquidity while PGK/AUD dropped by 2.4% to close at 0.4578 on the back of this week’s slump

• The slump in USD against the euro brought some gains in crude oil prices although market focus is fixed on OPEC policy meeting in Vienna where the group is expected to maintain its high output strategy

Click on the link below to view full report in PDF.

pdfKFM Weekly Investment Update: Friday, 04 December 2015

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