KFM Weekly Investment Update: Friday, 22 July 2016

Local Market Summary

• According to a recent Asian Development Bank report, PNG’s growth for this year is projected to be at 4.3% and would decrease to 2.4% next year. The slowdown is due to a combination of external (low commodity prices, soft global growth) and domestic (weaknesses in the non-mineral sector) factors

• The Government in a numerical strength of 85 Members of Parliament against 21 from the Opposition voted Peter O’Neill to remain as Prime Minister after the Opposition moved a vote of no confidence motion

• The Papua New Guinea National Research Institute (PNG NRI) released a report this week titled “Potential Gains from the Development of a Viable Residential Property Market in PNG” authored by NRI Associate Professor, Eugene Ezbello. In his reports Prof Ezbello said that the average rental prices in Port Moresby are around K2000 per month, far above salaries of lower income earners. Further, he said that the contributing factors included import duties on building materials, lack of infrastructure and the absence of available local building supplies

• Mining and exploration company, Niuminco Group (NIU) released their June
quarter activities report where key highlights included record monthly sales and production levels since 2014. In their report, NIU revealed that at current gold prices and exchange rates, the current operating cost break-even production level at Edie Creek is around 76 ounces of gold per month. Cash-at-hand at the end of the quarter was A$153,000 as a results of improved cash position and outlook

• Singaporean listed company Lifebrandz has announced its entering into a nonbinding term sheet with Asidokona Mining Resources for the proposed acquisition of Tolukuma Gold Mines. The proposed acquisition is subject to certain conditions, key being the recommencement of mining operations and the exploration programme currently underway, and is expected to be completed by June 2017

• A joint agreement was signed between Kumul Consolidated Holdings and Israeli company Innovative Agro for the development of the Sepik Plain Integrated Agriculture project, located within the Sepik Plain special economic zone. Trade Commerce and Industry Minister Richard Maru said the project will be developed on state land and will focus on poultry, large scale commercial cocoa production, and growing of grain for animal stock feed

• Oil Search (OSH) has conceded to world giant ExxonMobil in the bid to purchase outright the interests of InterOil in PNG. OSH MD Peter Botten said following a detailed review of ExxonMobil’s proposal, the OSH board had decided it was not in best interests of shareholders to submit a revised offer for InterOil. OSH proposed value was US$40.3 per InterOil share, for a total transaction value of approximately US$2.2bn, whereas ExxonMobil offered that InterOil shareholders would receive a payment of US$45.0 per share

• Furthermore, OSH’s total production in the second quarter of 2016 was 7.17m barrels of oil equivalent (mmboe). This was 7.0% lower than in Q1, with production impacted by routine maintenance and a brief unplanned shut-down of the PNG LNG plant, first time the plant has been shut down since production commenced in 2014. Despite this, the annualised production rate of approximately 7.4 MTPA was still well above nameplate capacity. Production from the OSH-operated PNG oil and gas fields held up well, contributing 1.74 mmboe net to OSH compared to 1.78 mmboe in the previous quarter (refer graph in the attachment below)

• Nambawan Savings and Loans Society (NSLS) held its inaugural Annual General Meeting (AGM) this week, stating that it has experienced major growth over the last five years. NSLS said membership and deposits have grown 25.0% per annum

• This week’s BPNG auctions in Central Banks Bills were offered only for 28 days with an oversubscription of K520.0m out of a total of K307.0m on offer. The weighted average yield was 1.05%. Auctions in Treasury Bills were
undersubscribed by K144.0m out of K261.3m on offer. Weighted average yields
were 2.6% for 91 days, 4.7% for 182 days and 7.7% for 364 days

• The KSi closed 1.4% higher for the week at 4,694.88 points on the back of a 2.3% gain in Newcrest Mining at K45.00. The KSHi also up 0.6% to end at 9,821.36 points supported by a 0.9% increase in Domestic banking stock, BSP, to end at K8.27

International Market Summary

• US stocks pushed lower, with both the Dow and the S&P retreating from record levels. Equities turned lower after the European Central Bank (ECB) was less forceful than investors had been speculating in signalling that additional stimulus is coming. The S&P 500 slid 0.4% to 2,165.2

• European stock markets retreated from a three-week high, as disappointing
corporate updates and lacklustre economic sentiment data from Germany soured
the investing mood. The euro reached a three-week low, weakening after the ECB decision. ECB President Mario Draghi indicated the ECB will consider adding fresh stimulus later this year when it has a clearer picture of the economic impact from the UK’s secession vote

• The Australian share market retreated from its 11-month high, slipping just below the 5500 level it breached for the first time since July as investors took a breather in a strong two-week long rally. The S&P/ASX 200 closed 14.0 points or 0.3% to 5498.2 points, but up 69.0 points or 1.3% for the week

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

pdfKFM Weekly Investment Update: Friday, 22 July 2016

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