KFM Weekly Investment Update: Friday, 29 January 2016

Local Market Summary

• Treasury Secretary Mr Diari Vele said that the Government is now faced with the challenge to manage the increase in debt stock. Mr Vele said the Government aimed to maintain macro stability and to re-prioritise existing commitments. These long term Government challenges include financing the budget and fiscal discipline, improving project evaluation, monitoring, reporting and implementation and maintaining investor confidence

• State owned enterprises have also contributed to the high cost of doing business in the country stated Public Enterprises and State Investments Minister Hon William Duma. According to him state-owned enterprises have contributed to the high cost of living and the high cost of doing business in the country hence SOEs must also work with each other to improve their performance

• The first liquefied petroleum gas (LPG) project is set to commence in 2018. This was revealed by outgoing Minister for Petroleum and Energy Hon. Nixon Duban during a meeting conference last week. Mr Duban said Twinza Oil Ltd is the company that has taken over the challenge of putting up this offshore project and that is it likely to be delivered before the Elk-Antelope LNG project

• Water PNG Ltd has signed a K145.0m agreement with the Government and the Ministry of Trade Commence and Industry to supply and manage water for the Pacific Maritime Industry Zone (PMIZ) Secretary for Trade Commerce and Industry Mr John Andrias said that this was a big investment as the ministry itself cannot meet all the financial requirements for the zone being the regulating body of the project. Hence , other state entities will be working in partnership with PMIZ through PNG Biomass

• New Guinea Energy L (NGEL) ended the year 2015 with a cash balance growth, recording K10.3 million by December of the year. This was despite its restructuring cost and buy back of shares in the period from October to December. According to market report, NGEL’s positive results were mainly attributed to the share buyback, continuous implementation of its strategy plan, sourcing external funds to service its debt and a respected PNG oil and gas drilling manager was appointed as its country manager

• BPNG released an announcement advising the general public that it has reduced the cheque dishonour period to 3 business days from the previous 4 days. This change is effective for any cheques presented on or after, Wednesday, 13th January 2016, and dishonoured on or after Monday, 18th January 2016. Once a cheques is deposited at a bank, the bank has 3 business days to process and/or dishonour the cheque

• This week’s BPNG auctions in Central Banks Bills were only offered for 28 days with an oversubscription of K396.0m out of total of K265.0m on offer. The weighted average yield was at 1.2%

• This week’s BPNG auctions in Treasury Bills were oversubscribed by K321.8 out of a total K321.0m on offer indicating strong appetite for the short term securities. The weighted average yield for 63 days was 2.6%, 91 days was 2.6%, 182 days was 4.7% and 364 days was at 7.7%

• The KSi Index ended the week up by 0.7% to close at 3,380.10 points, supported by an increase in share price of Oil Search (+1.8%) while the KSi Home Index was down by 0.2%, reflecting decline in banking stock Bank of South Pacific (-0.3%), to end at 9,326.62 points

International Market Summary

• Japanese markets swung wildly, dragging the region along for the ride, as the Bank of Japan stunned investors by announcing it would adopt negative interest rates in an effort to spur economic growth.

• European stocks declined for the week with the Stoxx Europe 600 Index closed 1.6% lower. Concerns of global growth amidst a rout in oil prices and a slowdown in China sent the Stoxx 600 down 8.5% this month, putting it on track for the worst January since 2008

• Australia’s benchmark stock index, the S&P/ASX 200 Index, gained 2.3% for the week. Gains in the S&P/ASX 200 Index were led by the financials and energy sector as oil prices rebounded

• World Bank is lowering its 2016 forecast for crude oil prices to U$37.0/bbl in its October projections. The lower forecast reflects a number of supply and demand factors. These includes sooner-than-anticipated resumption of exports by the Islamic Republic of Iran, greater resilience in US production due to cost cuts and efficiency gains, a mild winter in the Northern hemisphere, and weak growth prospects in major emerging market economies

• Oil extended gains from the highest close in three weeks as Russia’s energy minister said that OPEC and other producers may meet to discuss output reduction

• PGK/USD was lower for the week by 1.0% to end at 0.3295, PGK/AUD also fell by 2.8% to close at 0.4620 caused by a pick-up in AUD/USD, up 1.9% to close

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

pdfKFM Weekly Investment Update: Friday, 29 January 2016

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