KFM Weekly Investment Update: Friday, 04 March 2016

Local Market Summary

• PNG Chamber of Commerce and Industry (PNGCCI) received technical assistance from China in building up the county’s manufacturing and agriculture sectors. PNGCCI president Mr Leahy said that the manufacturing sector has experienced more reform in the trade area and has come through stronger and more export focused welcoming the move

• PNG Government is reviewing its tax structure and tariff reduction program to ensure it is relevant to PNG’s current economic outlook and development aspirations. Outgoing director general-trade Mr Rai said the current low commodity prices are having an opposing impact on the country’s economy

• Australia will sign a new aid partnership with PNG promoting economic growth and reducing poverty as well outlining their shared priorities in the health, education, transport and justice sectors. The two-way trade between the country is worth $6.8b and Australian investment in PNG totals $19.0b according to Australia Foreign Affairs Minister Julia Bishop

• OK Tedi Mine (OTML) resumed operations this week after a seven-month stoppage. OTML suspended operations on August 22 last year due to the draught conditions which made ships carrying critical supplies impassable up Fly River attached with the low copper price. Managing Director Mr Graham said the company was pleased to welcome employees back to site for the progressive restart

• Nambawan Super Limited (NSL) declared a profit after tax of K280.0m for the year ending 2015. NSL Board Chairman, Mr Anthony Smare, said the results were achieved in challenging economic conditions experienced globally and in PNG in 2015. The outcome enabled the Fund to pay a 5.8% crediting rate to members’ accounts, including the Retirement Savings Accounts of retired members. Furthermore, the fund will reserve a further 2.0% to mitigate against the expected continued economic challenges that the local and global economy will face in 2016

• Kumul Petroleum Group (KPHL) announced its successful 3 year extension of the financing arrangement it has with the Union Bank of Switzerland relating to its 10.0% shareholding interests in Oil Search. The arrangement was with regards to the K3.0b loan. According to a statement, KPHL has successfully reduced the annual coupon to 3.0% per annum (up from 4.9% last year)

• Bank of South Pacific (BSP) reported an operating profit of K531.9m in 2015, a 4.8% increase from K507.3m in 2014. BSP said the group’s revenues increased 3.2% during the year with growth attributed to interest income streams, particularly from loans & advances and income from newly-acquired assets. BSP Board chairman Sir Kostas Constantinou said despite difficult trading conditions and decline of foreign exchange income, 2015 has been successful for BSP group

• This week’s BPNG auctions in Central Banks Bills were offered for 28 days only, with an oversubscription of K448.3m out of a total of K346.0 on offer. The weighted average yield was 1.2%

• This week’s BPNG auctions in Treasury Bills were undersubscribed by K191.1m out of a total K300.0m on offer indicating weak appetite for the short term securities. The weighted average yield for 63 days was 2.4%, 91 days was 2.8%, 182 days was 4.8% and 364 days was at 7.7%

• The KSi Index ended the week up by 0.6% to close at 3,362.6 points, supported by an increase in share price of Oil Search (+1.4%) while the KSi Home Index was down by 0.2%; reflecting a decline in City Pharmacy (-1.5%) and Kina Asset Management Limited (-1.0) to end at 9,110.7 points

International Market Summary

• The outlook for global monetary policy has become clearer in recent sessions as data painted a more positive picture of the US economy, China’s central bank injected cash into the financial system, and markets tipped further easing by the European Central Bank

• In the US the sentiment has swiftly improved since Wall Street registered its lows for the year in mid-February, as recent data have shown the economy is more resilient than some feared. S&P 500 has risen nearly 9.0% since February 11 and is now down 3.0% for the year

• Asian stocks were subdued at the end of a solid week and ahead of Friday night’s highly anticipated US jobs report

• Global equities rallied for the week led by Japan’s Nikkei up 6.2% while MSCI Asia ex Japan was up 4.8%. US equities rose 3.2% supported by positive performance in the energy sector following sharp gains in crude oil up 3.1% (refer graph)

• Australia’s S&P/ASX 200 closed the week 0.4% higher and on track for its longest winning streak since late December. A rebound in banks and commodity stocks has helped the index, while sentiment was also given a boost midweek from a better than expected GDP report for the fourth quarter

• Light crude oil price maintained its rally for the third week closing at $34.81 with a modest gain for the week. Gold was down 0.2% at $1,261.8/oz on Friday after jumping 2.0% on Thursday, its biggest one-day gain since February 11

• PGK/USD was lower for the week by 0.8% to end at 0.3265, PGK/AUD also fell by 4.0% to close at 0.4432 caused by a 3.4% pick-up in AUD/USD to 0.7366

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pdfKFM Weekly Investment Update: Friday, 04 March 2016

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