KFM Weekly Investment Update: Friday, 01 August 2014

Local Market Summary

• The government of PNG has released the mid year economic and fiscal outlook report. Key economic indicators noted in this report was that the PNG economy is expected to grow at 5.4%, a downward revision from the 2014 budget estimate of 6.2% while Inflation is forecasted to 6.3%. The Central Bank has maintained its monetary policy stance by maintaining the KFR at 6.25%.

• Rural Industries Council’s chairman Sir Brown Bai, has called on the government to set aside 5.0% of the increased GDP resulting from the LNG project to develop the agriculture sector. Sir Bai warned that failing to act would only result in ‘the dreaded Dutch Disease’.

• Oil Search has doubled its total revenue to USD339.7m in the second quarter. Total oil and gas production in the period was 3.7m barrels of oil equivalent (mmboe) compared to 1.7 mmboe in the previous corresponding period.

• Newcrest’s production of gold and copper in the June quarter increased by 15.0% and 9.0% respectively compared to the March quarter. Newcrest produced 636,736 ounces of gold and 22,871 tonnes of copper in the last quarter.

• Mr Wapu Sonk, managing director of National Petroleum Company PNG has announced that the value for each LNG shipment from the country’s PNG-LNG Project costs USD50-60.0m. ExxonMobil PNG Ltd so far has shipped 12 LNG cargoes to sell on the spot market to customers in Asia.

• New Britain Palm Oil Ltd (NBPO) will export 50,000 tonnes of palm kernel oil per year. CEO Mr Nick Thompson said that palm kernel oil had the potential to generate around USD60.0m. This announcement comes after NBPO announced that it has invested USD30-40.0m in down stream processing facilities for the company.

• NBPO announced that it received a written correspondence from Kulim’s legal advisers informing the company of Kulim’s desire to divest its entire equity interest in NBPO. Kulim has completed a selection process and has selected Malaysian based multinational conglomerate Sime Darby Berhad as the preferred bidder.

• Cue Energy Resources recently announced its decision to de-list off the POMSox. This would come into effect on the 29/08/14. Current shareholders may still buy or sell shares through the company’s Australian listing via their brokers.

• Over the week, PGK/AUD closed at 0.4395, up by 0.8% while PGK/USD exchange rates closed 0.4084 down by 0.4% for the week.

• The KSi index was flat for the week at 3,785.6 and the KSi Home Index was up 1.0% at 8,317.1 for the week.

International Market Summary

• US stocks ended July with a more than 300 point selloff for the Dow Jones Industrial Average, a swoon that snapped a five-month winning streak for the broader market. (Refer to graph in the PDF attachment below).

• US dollar headed for a third weekly gain versus the euro, the longest stretch in two months, as signs of a sustained US recovery boost speculation the Federal Reserve is moving toward raising interest rates. Most Asian currencies fell against the dollar as investors preferred to hold the US currency.

• EU’s decision to step up sanctions on Russia will not leave the Eurozone economy unaffected. According to Roubini Global Economics the total negative impact on 2014 Eurozone GDP will be c.0.2%, signalling some downside risks to the overall 2014 Eurozone GDP number of c.1.0% from the turmoil in Ukraine and Russia, particularly if energy-supply disruptions materialize.

• Eurozone inflation took an unexpected turn for the worse in July, falling to a rate of 0.4% for the weakest showing in nearly 5 years.

• As of Friday, the MSCI Asia Pacific Index slipped 0.8%, Australia’s S&P/ASX 200 retreated 1.6%. Hong Kong shares dropped after their best month since 2012. Standard & Poor’s 500 Index futures added 0.3% following a 2.0% tumble overnight that pushed the US gauge down 1.5% in July.

• Asian spot LNG prices for September delivery reportedly averaged USD10.5 per million British thermal units (mmBtu) last week – a slight fall from the already-low USD10.6 per mmBtu of the previous week. This fall was mostly blamed on early export of PNG-LNG Project.

• Gold prices closed at their lowest level in six weeks at 1,284.4, after jobless claims data pointed to a potentially strong U.S. employment number for July.

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

pdfKFM Weekly Investment Update: Friday, 01 August 2014

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