KFM Weekly Investment Update: Friday, 23 October 2015

Local Market Summary:

•Finance Minister Hon James Marape confirmed that the Government has given approval
for the districts to use K2.0m from the service improvement programme funds to assist
with drought affected areas. He further commented that the 2016 national budget which is
to be tabled on November 3, would take into consideration the impact of the drought on
the economy as a whole

•Water PNG has paid a dividend of K5.6m to Kumul Consolidated Holdings. MD Mr Raka
Taviri confirmed that the dividend payment was based on capital employed at a rate of
2.5% for 2013 & 2014

•Barrick (Niugini), the PNG subsidiary of Canadian gold major Barrick Gold Corp, announced
it was suspending Porgera gold mine operations due to low levels of water in the mine’s
reservoir. The suspension of operations follows just two months after Barrick sold half of
its stake in the mine to China’s Zijin Mining Group for almost US$300.0m

•Oil Search (OSH) Managing Director, Mr Petter Botten said that the PNG LNG Project,
operated by ExxonMobil, has exported 77 cargoes of LNG year-to-date (September). OSH
owns a 29.0% stake in the LNG project and is “confident that the project can achieve annualised
production of at least 7.3MTPA over the balance of 2015 and into 2016” Mr Botten
said. According him, the demand for the project’s spot LNG volumes remained robust

•Earlier this week Kina Securities now Kina Bank released a statement on the Port Moresby
Stock Exchange that it has the potential of massive growth to be delivered over the coming
years. Kina Bank currently makes up 3.8% of the banking and financial services sector and
is the largest wealth management business in the country

•This week’s BPNG auctions in Treasury Bills were oversubscribed by K49.1m out of the
K240.0m on offer indicating increased appetite for short term Treasury securities. The
weighted average yield for both 63 days and 91 days was 2.4%, while 182 days was 4.5%
and 364 days at 7.4%

•This week’s auctions in Central Bank Bills were undersubscribed by K76.0m out of K562.0m
on offer possibly indicative of the market’s preference for attractive yields offered by
longer term securities. The weighted average yields were at 1.3% for 28 days, 2.3% for 63
days and 2.5% for 91 days. KFM expects rates to remain around current levels as supported
by subdued outlook for inflation

•The KSi Index ended the week in positive territory up 0.3% to close at 3,494.8 points supported
by an increase in the price of Oil Search, while the KSi Home Index was 0.1% lower,
caused by a drop in the share price of pharmaceutical stock City Pharmacy, to end at
9,663.2 points

International Market Summary:

•In the US markets, the S&P 500 closed at its highest in two months as stronger-than-expected
earnings from several top companies, relieved investors’ concerns about the
profit outlook. The Dow Jones industrial average rose 320.6 points, or 1.9%, to 17,489.2,
the S&P 500 SPX gained 33.6 points, or 1.7%, to 2,052.51 and the Nasdaq Composite IXIC
added 79.9 points, or 1.7%, to 4,920.05

•European stocks rallied to close the week after the European Central Bank (ECB) decided to
stick with its monetary support programme and reassess in December whether further
measures might be needed. The ECB kept interest rates unchanged at a record low. It also
left the key parameters of its quantitative easing scheme unchanged but said it would re-examine
the policy at its meeting in December

•The US markets as a whole have rallied and were poised for their best month since October
2011, on strong corporate results and cues from the European Central Bank about
extending its stimulus program. Microso8’s 3.0% rise ahead of its results on Thursday
provided the biggest boost to the S&P 500 and the Nasdaq. Alphabet, AT&T and Amazon
also report after the close

•Oil and gas producer Santos rejected a A$7.1b takeover offer from Bermuda-based Investment
Vehicle Scepter Partners. The bid, 26.0% above the closing price reviving interest in
the energy sector in light of a quell in global commodity prices. Other energy stocks that
also saw a rise for the week include Horizon Oil (up 14.3%), Origin Energy (up 10.2%), Oil
Search (up 0.7%) (refer to graph)

•National Australia Bank (NAB) said it’s raising its benchmark variable mortgage rate, joining
Commonwealth Bank of Australia and Westpac as the nation’s largest lenders seek to
cover the cost of holding more capital. NAB said the 17 basis-point rise to 5.6% from November
12 was in response to market conditions and regulatory changes. The move
dragged the Australian dollar lower as it raised speculation that the central bank may cut
interest rates to offset higher home-loan costs for borrowers

•PGK/USD closed for the week 0.4% lower at 0.3440 reflecting the continued shortfall in
liquidity while PGK/AUD and AUD/USD followed the same path both closing 0.2% lower at
0.4746 and 0.7249 respectively

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pdfKFM Weekly Investment Update: Friday, 23 October 2015

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