KFM Weekly Investment Update: Friday, 24 October 2014

Local Market Summary

• Treasury Minister Hon Patrick Pruaitch stated in the Parliament that PNG’s economy is on track as projected in 2014 budget. Mr Pruaitch mentioned this after returning from the World Bank Annual General Meeting in Washington DC. Top economic observers have made a good and favourable assessment on PNG’s prudent economic management.

• Minister Pruaitch further added that PNG has foregone K400.0m tax revenue under the State-sanctioned exemptions on GST, import duty and import excise. However, revenue collection reflects booming economic activities particularly mineral, oil and gas industries with exponential effect on other sectors.

• An Asian Development Bank report revealed that PNG State Owned Entities (SOE) needed more reforms to match performance of other Pacific country SOE’s. The report showed the average return on equity for PNG SOE’s were below neighbouring countries—Solomon Island, Fiji and Tonga.

• Nambawan Super’s (NSL) CEO Mr Garry Tunstall stated NSL expects lower return in 2014 due to factors affecting global market and the completion of the PNG LNG project construction phase. However, Mr Tunstall reiterated that the fund has set itself a strategic asset allocation that puts the fund in a much safer and higher return assets going forward.

• Newcrest released its final September quarter production and cost results, reporting 561.7koz gold, 24.8kt copper at cash costs of A$717.0/oz. Production was in line with guidance for a slower start to FY15, but costs benefited significantly from higher copper production, flowing through to increased by-product credits; a higher proportion of production coming from the low cost Cadia East operation and reduced capital spending.

• Oil Search announced its third quarter of 2014 activities with total oil and gas production was up 81.0% to 6.7m barrels of oil equivalent (mmboe), compared to second quarter of 2014 and nearly four times production achieved on the previous corresponding period. Third quarter production reached an all-time high for the company and was only marginally lower than production for the whole of 2013. The significant increase reflected the first full quarter of contributions from the PNG LNG project.

• Rimbunan Hijau (RH), the giant logging company in PNG, opened its K5.0m service station depot at Vision City Shopping mall in Port Moresby this week. In a partnership with Mobil, RH is using Mobil’s naming rights on the service station but exclusively owns this facility.

• This week’s BPNG Government Inscribed Stock auction was undersubscribed by K7.8m with a total of K97.1m bids successful. Rates were slightly down from last months auction with 2017 bonds yielding 8.1% in the shorter term bonds while 2031 bonds yielding 15.3% at the long-end.

• The KSi index was down by 5.8% at 3,813.14 while KSi Home Index was up by 1.8% to end the week at 9,212.35 mainly attributed to the increase in New Britain Palm Oil share price.

International Market Summary

• Global equity markets are higher, with stocks on Wall Street surging more than 1.0% as US corporate earnings continued to beat expectations, while government debt prices fell on encouraging American and German economic reports. Results from Caterpillar and 3M, both Dow components, reassured investors that companies with large overseas revenue streams can deliver solid profits despite concerns about global economic growth. The Dow Jones, S&P 500 and NASDAQ all closed higher in the week (refer to graph in the PDF attachment below).

• Stocks in Japan surged for a second #me this week while Hong Kong emerged as one of the best-performing major Asian indexes so far this month. The Nikkei close the week up 5.2%.

• Gold futures pulled back from a six-week high as a stronger dollar and lackluster US inflation pressured prices lower. Gold closed the week lower 0.8% at US$1,229.1.

• US crude-oil futures gained the most in more than a month, buoyed by modestly upbeat data on European and Chinese manufacturing. Light crude finished the week at lower at US$82.1 while brent crude closed higher at US$86.7.

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

KFM Weekly Investment Update: Friday, 24 October 2014

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