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KFM Weekly Investment Update: Friday, 08 May 2015

Local Market Summary

• A mission from the Melanesian Spearhead Group (MSG) was in PNG to discuss private sector development in the sub-region. MSG members from PNG, Fiji, Solomon Islands, Vanuatu and New Caledonia acknowledged the vital role of private sector development for broad based growth. In PNG, key obstacles to business are related to access to infrastructure and energy, security and logistics challenges.

• In the PNG Chamber of Mines and Petroleum’s 26th annual meeting, president Mr Gerea Aopi said the government and resources companies need to work together to deliver mega-projects in the face of lower mining and petroleum prices. He added that lower commodity prices have been hurting mining companies over the past 3 years with the big fall in crude oil prices since December affecting all oil and gas producers.

• Horizon Oil, in partnership with Osaka Gas, has completed a pre-feasibility study for a mid-scale LNG project in Western Province. Horizon said in a report that a scheme with new shore plant at Daru Island is the leading concept for the Stanley gas condensate project. Participants in the US$19.0bn (Kbn) LNG project advised that they had signed an agreement with the government providing for the award of development and pipeline licenses for the P’nyang field to enable expansion of the LNG project.

• ANZ has posted a A$3.5bn (K7.4bn) profit for the six months to March 31, the bank’s net profit grew 3.0% from the pcp. ANZ made just under A$3.7bn (K7.8bn), up 5.0% last year on its preferred cash figure. ANZ’s CEO Mike Smith said the bank performed particularly well in its core domestic Australian and New Zealand market.

• Westpac Bank Group announced a cash profit of A$3.8bn (K8.0bn) in its first half results for the year (Sep 2014-Mar 2015). The bank stated that the result which was in line with the pcp saw a statutory net profit of A$3.6bn (K7.7bn). It stated that cash earnings for its Westpac Pacific business, of which PNG is included, was down A$6.0m (K12.0m) which was negatively affected by foreign exchange controls introduced in PNG in July 2014, offsetting a strong rise in net interest income.

• BSP group chairman Mr Kostas Constantinou said the bank remained committed to maintaining its credit profile and strong business position in PNG and throughout the Pacific region following a positive credit rating by the S&P of B+ for BSP. The rating reflects BSP’s strong profitability throughout the outlook horizon.

• Marengo Mining (MMC) has announced an updated resource estimate. MMC stated that highlights of the Yandera resource estimate included measured and indicated resources that totalled 630.0m tonnes grading of 0.3% copper, 0.01% molybdenum and 0.07 ppm gold; or 0.4% copper equivalent. The company said that the 2015 measured and indicated copper-equivalent resource estimate for Yandera represented an update of the 2012 resource estimate. CEO Mr Pieter Britz said they were happy with the current developments taking place at the mine.

• The Kina Facility Rate (KFR) released by BPNG will stay 6.25% for the month of May 2015.

• This week’s BPNG auctions in Treasury Bills were undersubscribed by K63.7m out of the K150.0m on offer. Weighted average yields remained flat at 4.7% for 182 days and 7.4% for 364 days from last week’s auctions.

• The KSi index ended the week at -6.6% from the last week at 3,606.81 and the KSi Home Index at 0.3% during the week to close at 9,770.35.

International Market Summary

• US stocks rose, a day after they fell in the wake of the Federal Reserve Chair Janet Yellen’s warning, who has noted the following:

  • Both stocks and bonds are high. ‘I would highlight that equity-market valuations at this point generally are quite high’
  • ‘Now, they’re not so high when you compare the returns on equities to the returns on safe assets like bonds, which are also very low, but there are potential dangers there’
  • Bond yields ‘could see a sharp jump’ when the Fed raises its benchmark interest rate

• European stocks finished modestly higher, but not before diving sharply lower, with uncertainty around the UK general election adding to an already thick mix of worries surrounding rebounds in the Euro, oil prices and bond yields.

• RBA narrowed its growth forecast for 2015 to 2.5% versus 2.25-3.25% previously and saw the economy growing at 2.75-3.75% in 2016, down from 3-4.0%. It now saw underlying inflation at 2.5% for 2015, versus 2-3.0% previously, and shifted down its 2016 forecast range to 1.75-2.75%, from 2-3.0%. Accordingly, the RBA has cut its cash rate to a record low 2.0% this week.

• The ASX 200 closed 11 points, or 0.2% lower at 5634.6 for the day and 3.1% lower for the week, the worst result for almost two years due to the fall in financial sector. Today the All Ords dropped 9 points to 5635.4, 3.4% for the week (refer to graph in the PDF attachment below).

• Asian Stocks fell on concerns about the sluggish US economy and overvalued equity markets, with Shanghai dropping the most and extending a deep two-day correction.

• The oil price close lower for the week. Brent closed 1.8% lower at US$65.25 while light crude closed 1.3% lower for the week at US$58.40 per barrel

• Gold prices remained flat closing the week up 0.7% up at US$1,182.90

• PGK/USD closed at 0.3730 and PGK/AUD depreciated by 0.1% to close at 0.4715

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

pdfKFM Weekly Investment Update: Friday, 08 May 2015

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