KFM Weekly Investment Update: Friday, 05 August 2016

Local Market Summary

• The Waigani court complex will be built by the China Railway Construction Engineering at the cost of K427.0m. The complex will involve the construction of 14 courtrooms, judge’s chambers, holding cells and other support services. The contract was signed at Government House in Port Moresby

• Kumul Consolidated Holdings (KCH) signed a memorandum of understanding (MoU) with Hong Kong based property developer, Shin Kong Pacific Investment Ltd (SKPIL), to construct and develop a five-star hotel property. KCH Managing Director, Garry Hersey, said SKPIL has the experience being a subsidiary of the Shin Kong Investment Co Ltd and as such was a suitable partner for KCH in the venture. Furthermore, Mr Hersey said that they expect the first stage of development to be ready for the APEC in 2018

• A grant of K185.0m will be given to the Oil Search foundation over five years (2016 to 2020) by Oil Search, the company announced. The grant will fund the foundation’s core operational costs and the signature programmes that deliver sustainable development outcomes within the areas of health, leadership and education, plus women’s protection and empowerment

• According to Bank South Pacific (BSP), Foreign Exchange inflows have improved in the past two months. The Chief Executive officer of BSP Robin Fleming said that these inflows have allowed BSP to assist importers with settlement of overseas trade-related payments, particularly the longer outstanding payments

• Kina Securities Limited announced that it has extended the escrow arrangements between Fu Shan Investment Limited until next Friday. This extension will allow for Fu Shan to accommodate BPNG regulatory requirements. The shares held in Escrow represent 20.0 percent of Kina’s issued capital

• Toyota Tsusho (PNG) Ltd, Ela Motors CEO Takeshi Abe said in an interview that the company has increased its retail prices due to shortage of foreign exchange in the country which has heavily impacted import costs. Mr Abe said the lack of foreign exchange resulted in delayed payments to overseas suppliers on time which now saw the company incur a backlog of payments
to settle. He further added that the business environment in PNG remained tough but their large market share for its brands including Toyota, Hino and Yamaha were still the preferred brands by Papua New Guineans. In light of this, Mr Abe said they will be launching several new products later in the year

• The Kina Facility Rate for the month of August remained unchanged at 6.25% from the previous month

• This week’s BPNG auctions in Central Banks Bills were offered only for 28 days with an oversubscription of K90.9m out of a total of K329.6m on offer. The weighted average yield was 1.04%

• Auctions in Treasury Bills were undersubscribed by K90.9m out of K200.1m on offer. Weighted average yields were 4.72% for 182 days and 7.69% for 364 days

• The KSi and KSHi closed 0.1% and 0.4%higher at 4,700.35 and 9,863.95 points respectively on the back of a 0.6% gain in BSP and a 0.2% gain in OSH share price

International Market Summary

• US stocks closed mostly unchanged as investors appeared reluctant to make big bets a day ahead of the closely watched monthly jobs report. Early modest gains following a rate cut by the Bank of England (BOE) diminished by the close. The benchmark S&P 500 index closed virtually unchanged at 2,164.3

• European stocks booked a solid gain as the BOE embarked on an aggressive stimulus plan. UK stocks jumped as the BOE cut its benchmark interest rate, for the first time in seven years, to 0.25% from 0.5%, and ramped up its stimulus efforts in the aftermath of the Brexit vote. The FTSE surged 1.6% to close at 6,740.2

• Australia’s central bank signalled further interest rate cuts are likely as inflation may be below its 2.0%-3.0% target until the end of 2018. This comes after it cut its overnight cash rate by a quarter of a percentage point to a record low 1.5% to give the economy another kick along and boost inflation, which is facing a number of risks. The ASX 200 ended the day 22 points, or 0.4% higher at 5,497.4

• Oil prices were in retreat again, after finally breaking out of a five-session losing streak midway through the week, and climbing 2.7% on Thursday. Brent crude, the international oil benchmark, was down 0.9% in Asia at $43.9 while West Texas Intermediate was off by the same amount at $41.6 (refer to graph in PDF attachment below)

Click the link below to view the full daily market report in PDF.

pdfKFM Weekly Investment Update: Friday, 05 August 2016

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