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KFM Weekly Investment Update: Wednesday, 24 December 2014

Local Market Summary

• Treasurer Hon Patrick Pruaitch maintained the government’s stand on the forecasts behind the 2015 budget and assured the country that recent declines in the price of commodities especially oil are being closely monitored.

• Finance Minister Hon James Marape added that despite the decline in the price of oil by around 35.0% in the last two months, the government remained confident that expected inflows such as the proceeds from LNG would allow the approved budget to come in to fruition.

• PNG Opposition Leader Hon Don Polye has said that the PNG Kina must be re-floated so that commodities can earn hard currency for the country. He added that small growers have had earnings placed under threat due to the pegging of the Kina and that it should be re-floated so that market forces can decide.

• According to PNG the Chamber of Mines and Petroleum PNG remains an attractive destination for foreign investors despite plummeting commodity prices. A lot of interest is directed to the ongoing exploration on the gas projects following the successful launch of the first PNG LNG gas projects.

• Telikom PNG is likely to record a significant drop in losses for this year after recording a 75.0% drop in losses in the first nine months of 2014. Revenue between January and September was at K233.7m against K325.1m at the end of 2013. This is a major reduction after net profits at the end of 2013 recorded a loss of K35.2m.

• Air Niugini CEO Mr Simon Foo said the company has had a difficult year in 2014 so far with completion of the PNG LNG construction phase having a negative impact on the organisation’s operations but was optimistic of positive months to come.

• Airlines PNG will purchase six aircrafts over the next few years to expand, improve its services and competitiveness according to the company’s COO Mr Paul Abbot.

• Marengo Mining (MMC) has identified a new prospect named Rima, which is near the Yandera project which is operated by MMC. CEO Mr Pieter Britz disclosed that MMC had done studies on Yandera’s neighbouring areas, having identified drilling targets.

• The Stanley gas-condensate project in Western Province is ready for testing and operation. According to Horizon Oil the two wells, Stanley 2 and Stanley 5 have demonstrated a capacity to produce in excess of the design capacity of 140.0m cubic feet a day.

• This week’s BPNG auctions Treasure Bills were undersubscribed by K44.5m for 182 days with a weighted average yield of 4.7% and K87.5m for 364 days with a weighted average yield of 7.4%.

• The KSi index was up 1.2% to 3,494.18 from 3,452.84 while KSi Home Index was lower for the week flat 0.5% at 9,508.48 from 9,553.87.

International Market Summary

• By Wednesday this week the US equities climbed to all-time highs as the world’s biggest economy grew at the fastest pace in 11 years. the Dow Jones Industrial Average rallying past 18,000 for the first time. The DJIA and the S&P500 closed the week higher 3.8% and 3.4% at 18,024.17 and 2,082.17 respectively (refer to graph in the PDF attachment below).

• Accordingly, the European stocks rose for a sixth day, the longest winning streak since April. The FTSE closed the week up 4.1% while in France, the CAC 40 closed higher in the week 4.9%.

• Further, the Asian stocks rose with the Nikkei surging higher 4.8% to 17,635.14 and the Hang Seng 3.3% higher closing 23,333.45 from 23,151.94 for the week following gains in the US and Europe.

• Emerging market stocks fell, with the MSCI Emerging Markets Index dropping 0.6% after four days of gains. The Shanghai Composite Index slumped 3.0%, paring its surge over the past month to 20.0%.

• US 10 year bond yields are higher at 2.3% while rates on German bonds fell one basis point to 0.6% about 3 points away from a all time low.

• Crude-oil prices rose to their highest level in more than a week amid signs of stronger demand in both the U.S. and China, the world’s largest oil consumers. Brent Crude closed the week higher US$61.3 per barrel up 1.1% from US$59.6.

• Gold held near a three-week low as the U.S. economy expanded more than estimated, boosting the case for higher interest rates. Gold closed lower 1.4% for the week at US$1,177.2 per ounce.

• As of Wednesday this week, PNG/USD was unchanged at 0.3879 while PGK/AUD appreciated by 0.1% to 0.4783

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

pdfKFM Weekly Investment Update: Wednesday, 24 December 2014

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