KFM Weekly Investment Update: Friday, 27 May 2016

Local Market Summary

• The CPI was 1.6% in March quarter 2016, compared to 1.9% in December quarter of 2015. The CPI headline index also showed an annual change of 6.5% over 12 months from March quarter 2015 to March quarter 2016

• Prime Minister Peter O’Neill said the Bank of Papua New Guinea (BPNG) introduced a trading ban on the exchange rate because some commercial banks were trading at rates which benefitted them only, in that the commercial banks at times made money out of foreign exchanges trading at the cost of public lending. PM O’Neill said BPNG and Treasury were negotiating with “our traditional partners” at the International Finance Corporation, Asian Development Bank and Exim banks about concessional support to generate foreign currency by way of
funding projects through these institutions’ lending

• Independent Consumer and Competition Commission (ICCC) Commissioner and CEO Paulus Ain in a statement raised concerns on Oil Search’s proposed acquisition of InterOil. He said ICCC is urging Oil Search and InterOil to respect PNG’s established statutory framework and seek relevant regulatory approval under the ICCC Act, 2002, and be protected. He added that Section 60 of the ICCC Act prohibited the acquisition of assets or shares of a business that would have, or would be likely to have, the effect of reducing competition in a market. An Oil Search spokesperson said Oil Search noted the issues raised by the ICCC and intend to engage in constructive discussions with them to address their concerns

• Kumul Petroleum Holdings (KPHL) Chairman Frank Kramer revealed during and AGM that KPHL has recorded K501.0m of dividends paid to the Government. Mr Kramer said despite the low oil and LNG prices affecting the profitability of industry players worldwide as well as the returns from investments in PNG LNG and Oil Search, the company has operated well and fulfilled all its obligations. He added that with the company’s performance they are now ready to acquire other projects such as Pynang and the Papua LNG

• Mining Minister Byron Chan said the Government is waiting for Ramu Nickel to submit an independent technical investigation report on the fatal incident at the mine. Minister Chan said the report had to be submitted before the Government could make any decision to lift the stop-work order it placed on the Basamuk refinery operations, as the initial investigations revealed unsafe and defective management systems that were prevalent on the high pressure acid leach trains

• Asidokona Mining Resources, the new operator of the Tolukuma mine, is currently rehabilitating the mine, director Vincent Siow said. Mr Siow said an independent mining consultant had been engaged to assist in the process, with the mining programmes, and will undertake some resource drilling and other works necessary to estimate the life of the mine for the mining lease. The mine was handed over by Petromin Holdings Limited (now Kumul Mineral Holdings Limited) last December

• PanAust MD Fred Hess, during the release of the company’s Business Review and Sustainability Report for year ending December 31 2015, stated that its approach to managing sustainability and stakeholder engagement at its Laos operations forms the template on how it will develop the Frieda project. Dr Hess said the high sustainability standards achieved at PanAust existing operations in Laos have been embraced in the Frieda River Project

• This week’s BPNG auctions in Central Banks Bills were only offered for 28day maturities with an over-subscription of K397.0m out of a total of K220.0m on offer. The weighted average yield was 1.11%

• Auctions in Treasury Bills were over-subscribed by K197.4m from a total offer amount of K152.5m. Weighted average yields were 4.7% for 182 days, 7.7% for 364 days over the same period

• The KSi closed 2.4% higher at 4,416.3 points on the back of a 5.3% gain in NCM share price, and the KSHi was also up 1.1% to end at 9,299.2 points supported by 1.3% increase in share price of BSP

International Market Summary

• US stocks closed little changed after two days of strong gains as crude-oil futures failed to hang on to a move above $50 a barrel and investors brushed off betterthan-expected economic reports. The S&P 500 which spent the session fluctuating between slight losses and gains within a 7-point range, closed down 0.4 points at 2,090.1, weighed down by the materials and financials sectors

• European stocks soft as oil retreats from $50; logging a modest gain Thursday as energy shares got a brief boost from Brent crude futures with the Stoxx Europe 600, gaining 0.1% to close at 348.9 points; G7 leaders say Brexit poses ‘serious risk’ to global growth

• Japanese stocks rose in thin trade amid steady yen weakness and media reports that the country’s Prime Minister would delay by two years a sales tax hike scheduled to go into effect in April 2017. The Nikkei share average edged up 62.4 points or 0.4% to end the day’s session at 16,834.8 points

• Australian shares made it seven straight weeks of gains, with the ASX 200 finally managing to close above 5400 ahead of a key speech by US Fed chair Janet Yellen tonight. The ASX 200 added 18.0 points, or 0.3%, to 5405.9, its highest in nine months (Refer graph in the attachment below)

• PGK/USD remained unchanged for the week to end at 0.3160, PGK/AUD fell by 0.1% to close at 0.4371 caused by an increase in the AUD/USD, up 0.1% to close at 0.7229

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

pdfKFM Weekly Investment Update: Friday, 27 May 2016

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