KFM Weekly Investment Update: Friday, 11 December 2015

Local Market Summary:

•Minister for Fisheries Mr Mao Zeming has joined forces with the Parties to the
Nauru Agreement (PNA) secretariat and members of the Pacific Island Parties
(PIPs) in raising concern on a US decision to renege on the interim arrangement
on the US Multilateral Fisheries Treaty which was signed by the US and 17 PIPs
in August this year, during the 16th renegotiating session of the US Treaty in
Australia. The Minister said revenue from the deal represented a sizable portion
of the annual budget for many island countries, and this shock decision by the
US means these economies will face some hardships in 2016 and onwards

•Executive Director of Institute of National Affairs, Mr Paul Barker was asked to
comment on the Government’s K17.0bn debt and he said that the current level
of debt was a result of the Government over-optimistic spending well in advance
of anticipated earnings from resource projects. He warned that the debt levels
had been pushing above the legal limits in official figures but in reality the debt
levels were higher than that when you consider other liabilities that are recorded
such as debts placed under State Owned Enterprises like Kumul Holdings and
debts to superannuation funds especially Nambawan Super Limited

•Asian Development Bank (ADB) gave a presentation on their ‘2015 Year in
Review’. Head of Portfolio and Projects, Mr Muhammad Ingratubun said that
ADB’s portfolio in PNG is currently worth US$1.1bn (K3.3bn). He said that in the
last four years, average contracts awarded had risen from US$23.0m (K70.2m)
to US$150.0m (K458.0m)

•According to Rural Industries Council chairman, Sir Brown Bai, they are
concerned about the lack of appointment of commodity boards in order to boost
the agriculture sector. Sir Bai mentioned that boards yet to be appointed include
Kokonas Industry Korporation, Coffee Industry Corporation, Cocoa Industry and
National Agriculture Inspection Authority noting that the only board in place was
that of the rubber industry

•Australian oil and gas company, Woodside Petroleum (WPL) announced that it
has withdrawn its proposed bid for a merger with Oil Search (OSH) saying it
would not pursue any alternative transactions to combine the businesses. The
A$11.0bn proposal from WPL was turned by OSH with its board saying the offer
was ‘opportunistic and grossly undervalued the company’

•State owned Petromin announced they have concluded the sale of its ownership
of the Tolukuma Gold Mine (TGM) to Singaporean based Asidokona Mining
Resources for K81.0m. The purchase price for TGM includes a non-cash
component which includes 10.0% of issued share capital to be given free to
Central Provincial Government and the Tolukuma landowners. The agreement
also includes K6.0m funding for construction of a new road to provide access to
the village of Tolukuma

•This week’s Central Bank Bills weighted average yields remained unchanged 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
K24.76m out of the K260.0m on offer indicating reduced appetite for short term
Treasury securities. The weighted average yield for 182 days was 4.6%, while
364 days was at 7.5%

•The KSi Index ended the week down by 2.0% to close at 3,491.5 points,
underpinned by a drop in Oil Search which was down 7.5% while the KSi Home
Index was up by 0.1%, supported by the share price increase of Bank South
Pacific, to end at 9,607.92 points

International Market Summary:

•US Stocks rose for the week amid fall in crude oil price, while the dollar
strengthened. The Federal Reserve’s meeting in December is anticipated to
raise interest rates. Still, investors are caught between optimism about US
growth and concern that a slowdown in China and the consequent tumble in
commodities will damp global growth prospects. Oil’s slump since OPEC’s
decision to effectively abandon its production target has unsettled global
financial markets

•European equities lost 5.8% from their 3 month high in November as commodity
producers kept on sliding and the European Central Bank’s added stimulus fell
short of expectations. The benchmark index was down in anticipation of the
extended ECB measures and on optimism that the US economy is strong
enough to withstand an increase in interest rates by the Federal Reserve

•The Asian stock market slumped as plunging crude prices heightened fears
about receding global growth. Excess supply in oil markets and cooling growth
in China, the world’s biggest commodities consumer, have pressured many
asset markets ahead of a widely expected hike to U.S. interest rates by the
Federal Reserve next week

•OPEC oil production accelerated to a three-year high in November. According to
a monthly oil market report by the group producer, output increased to 31.7m
barrels a day, up from 31.5m b/d in October indicating that OPEC continues to
produce far more than its former production target of 30m b/d. Oil prices
dropped further on Thursday with Brent crude dipped below US$40 a barrel

•PGK/USD remained unchanged for the week at 0.3350 while PGK/AUD
increased by 0.9% to 0.4618 caused by the drop in AUD/USD, down 0.9% to
close at 0.7255

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pdfKFM Weekly Investment Update: Friday, 11 December 2015

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