KFM Weekly Investment Update: Friday, 22 November 2013

Local Market Summary

• The Kina Securities Index (KSI) remained unchanged to 3,832.27 while the KSI Home Index increased by 0.1% to 8,229.93 for the week.

• On Wednesday 20 November, Treasury Minister Don Polye unveiled the 2014 National Budget flagged by the theme “Consolidate Gains for Sustained Growth through Prudent Investments”.

• 2014 budget appears to be substantially deficit (compared to 2013 budget) supplemented by concessional funding and grants build on the platform of macroeconomic reforms and investment incentives in key growth sector from the 2013 National Budget. That is, the 2014 budget will continue to address implementation issues while maintaining the focus on health education and other development sectors and maintaining PNG’s macroeconomic stability. The Government, nevertheless, acknowledged that there are underlying issues that impinge on public sector service delivery and private sector led market development.

• Major tax reforms will be subject to Tax Review Committee recommendations expected to be published by March 2015.

• The economic overview of the budget;

  • The National budget projects total revenue and grants of K12.7 billion (K2.2 billion or 21% higher compared to revised estimates for 2013).
  • Total expenditure will be K15.3 billion showing a deficit of K2.6 billion or 5.9% of the GDP (compared to K2.5 billion planned for 2013).
  • The 2014 budget focuses on 7 key priorities stipulated in the PNG Medium Term Development Strategies (MTDS) 2015.

• Government is expected to borrow an additional K2.6 billion by 2014 to fund the deficit.

• Domestic debt is expected to increase by 19% to K10.5 billion at the end of 2014 (compared to K8.751 billion in 2013). Inscribed stock and Treasury bills are the major forms of domestic debt undertaken by the government. Treasury bills are expected to provide some 46% of domestic debt in 2014.

• Airlines PNG will soon expand its domestic schedule to other New Guinea Island provinces. According to the Managing Director Muralee, the Airline remains firmly committed to developing business links throughout PNG and such move is a direct response to customer demand.

• Autonomous Bougainville Government (ABG) has passed a law on inward investment to balance economic development with the needs of the locals. Small Business Association Development Corporation Director Tuia Namani commented the tailoring of such and similar policy which is captures a mutual understanding between the resource owners’, developers and investors. Namani stressed the need for foreign investors however, on the provision that proper legislation has to be in place to safeguard the need of the resource owners (land owners).

International Market Summary

• Reserve Bank of Australia Chairman said in his speech to a forum of market economist yesterday (Thursday 22, November) that while central bank remains unconvinced about the effectiveness of trying to drive down the Aussie, he remain open minded about currency intervention. The speech suggests markets should probably give further consideration on to the set of conditions that might push the RBA to reach deeper into its toolbox.

• West Texas Intermediate (WTI) crude traded (in the week) nears the highest price after application for unemployment benefits declined, signalling an economic recovery in the world’s biggest oil consumer. (See graph in the PDF attachment below)

• European share slipped lower as a gauge of China manufacturing dropped more than forecast and minutes from the Federal Reserve’s last meeting signalled the U.S. may reduce stimulus in coming months. The Stoxx Europe 600 Index lost 0.2 % to 322.42 at the close of trading.

• Gold prices dropped marginally by 3.5% to $1,242.90.

• Oil closed high for the week to USD$95.13 per barrel while Brent increased 1.3% over the week to close at USD$109.92 per barrel.

• The Kina appreciated against the AUD and depreciated against the USD during the week. The PGK finished the week at PGKUSD0.3870 and PGKAUD 0.4214.

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

pdfKFM Weekly Investment Update: Friday, 22 November 2013

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