KFM Weekly Investment Update: Friday, 11 April 2014

Local Market Summary

• Sacked Papua New Guinea Treasurer and Kandep MP Don Polye will be asking the courts to declare the K3 billion (US$1.1 billion) loan as unconstitutional and seek orders for his reinstatement as Treasurer. In a press conference Monday, MP Polye, flanked by his lawyer John Napu, said he is going to the courts to seek justice because the whole loan smells “fishy” and was very suspicious.

• The State has filed an application through its Singapore lawyers to stop PNG Sustainable Development Program (SDP) from selling assets worth US$1.4 billion, and to appoint independent receivers to take control of these assets. The Attorney General, Kerenga Kua claimed that those presently in control of the SDP failed to utilize the assets for the benefit of Western Province and put the assets in jeopardy, refused to recognise rights of the State as a representative of the people and commenced proceedings against the state before the Singapore courts and International Centre for Settlement of Investment Disputes.

• The Independent Consumer & Competition Commission (ICCC) announced an increase on fuel prices for the kerosene, petrol and diesel. The retail pump price for petrol is now K4.11/L an increase of 10t. Kerosene price has also gone up by 5t to K3.47/L and the Diesel price has inclined by 7t to K3.61/L. The rise in fuel prices is due to the significant increase in sea/road freights and depreciating Kina in March 2014.

• Highlands Pacific Limited released its 2013 Financials results announcing total revenue of US$157,000, down 56% from US$365,000 in 2012. Total Operational Cost was US$9,751,000, down 42% from U$16,953,000 in 2012, mainly due to PanAust take-over of Glencore Xstrata plc interest in Frida River Copper Gold Project, assuming 100% of its exploration cost. The Ramu mine Investment saw impairments of US$15,000,000 in the period.

• OSH announced details of an SPP that will enable Eligible Shareholders to purchase up to A$15,000 or PGK33,505 worth of new OSH shares at an issue price which is the lesser of: the price institutional investors paid in the institutional placement, which was A$8.20 per Share; or Oil Search’s volume weighted average (VWAP) price over the last five trading days up to the SPP close on Friday, 9 May 2014.

• Central Bank Governor Loi. M. Bakani announced the 2014 March Monetary Policy Statement citing 2013 inflation outcome of 4.7%, while on an upward trend, was below the Bank’s annual forecast of 5.5%. The Bank forecasts a higher annual inflation rate of 6.5 % in 2014, reflecting imported inflation and some passthrough of the kina depreciation. The Kina Facility Rate (KFR) released by the Bank of PNG will be maintained at 6.25% for the month of April 2014.

• The KSi Index closed the week 0.4% higher on 3,641.44 while the KSi Home Index closed the week flat at 8,130.97.

International Market Summary

• U.S. stocks fell, with the Nasdaq Composite Index sinking the most since 2011, as technology shares resumed a selloff on concern valuations are too high as earnings season begins. Treasury rates sank to a three-week low on speculation interest-rate increases won’t be accelerated.

•The U.S. threatened Russia with more sanctions for its incursion into Ukraine as global finance chiefs debated how best to deliver aid to the beleaguered former Soviet republic. With Group of Seven finance ministers and central bankers meeting yesterday in Washington, U.S. Treasury Secretary Jacob J. Lew delivered the warning in talks with his Russian counterpart, Anton Siluanov. It was made just hours after Russian President Vladimir Putin threatened to halt natural gas shipments to Ukraine.

• To end the week the PGK depreciated against the USD and AUD by 0.5% and 2.4% respectively. Whilst the AUD appreciated by 1.9% against the USD (see chart in the pdf attachment below).

• In world oil prices the Brent crude rose by 1.2% to US$107.46 a barrel while Light crude also gained 3% to US$103.36.

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

pdfKFM Weekly Investment Update: Friday, 11 April 2014

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