KFM Weekly Investment Update: Friday, 02 February 2018 - Kina Bank

KFM Weekly Investment Update: Friday, 02 February 2018

Local Market Summary:
•The 2018 Prime Minister’s Back to Business Breakfast was held at the
Stanley Hotel this week where featured speakers included PM O’Neil,
Chief Secretary Isaac Lupari, Kina Bank CEO Greg Pawson and
Business Council of PNG President Robert Nilkare.
•Prime Minister O’Neil has assured PNG businesses of the Governments
K1.9b budget support to relieve businesses. PM O’Neil made clear that
funds will be utilised to assist in alleviating issues surrounding foreign
currency shortages and back log of payments mainly for imports.
•Furthermore, PM O’Neil has indicated that the Government will be
concentrating on a new taxation reform after many business failed to pay
taxes. He stated that the government will reassess and reduce high tax
rates in a sustainable but gradual manner to suit small to medium
•President of Business Council of PNG spoke of the need to build strong
partnerships between private and public sectors for the greater benefit
of the country. He also went on to add that the agriculture sector needs
to be promoted for investment in a time when the country is heavily
reliant on the mineral sector for revenue to support the economy.
•Kina Securities CEO, Greg Pawson presented the bank’s market outlook
and agreed that the economy is very constricted but the government’s
policy to support infrastructure should be able to see improvements in
export levels saying that Non-mineral GDP growth is expected to pick up
largely driven by agriculture, fisheries and forestry exports.
•Credit Corporation (CCP) Chairman Sir Wilson Kamit CBE, has
announced the appointment of Mr Peter Aitsi as CEO for the CCP
group of companies. Mr Aitsi is a well-respected and highly regarded
leader with extensive experience in PNG’s private sector. His
appointment comes at a time where his leadership skills will assist CCP
and its subsidiaries through its next stage of growth.
•Highlands Pacific (HIG) recorded excellent production performance in
achieving a rise to nickel and cobalt prices. With strong results recorded
in the last quarter of 2017, it generated net cash flow of US$49 million
(K154.89mil) for December alone. HIG attributed its effects to the Ramu
nickle/cobalt mine in Madang in which it holds an 8.56 percent interest.
•This week’s BPNG auction results in Central Bank Bills were offered for
28 days was over-subscribed by K20.0m out of the total amount of
K417.5m offered, indicating an increase in appetite for shorter dated
securities. The weighted average yield for 28 days remained unchanged
at 1.40% from the previous week.
•This week’s BPNG auction results in Treasury Bills were undersubscribed
by K115.4m out of a total amount of K242.0m on offer,
indicating weak appetite for longer dated securities. Weighted average
yields for 182 days, 273 days and 364 days remained unchanged at
4.73% 6.76% and 8.04% respectively from the previous week.
•KSi Index increased by 1.9% to end at 5,798.25 was mainly underpinned
by the increase in share price of OSH and KSi Home Index remained
unchanged from the previous week to end at 10,919.01 points.
International Market Summary:
•US 10-year bond yields reached four-year peak this week closing at
2.71% gaining 38 basis points year to date. However, despite rising bond
yields in the US, the US dollar index continues to slide downward. This
could be due to improving growth around the world and decrease in
policy divergence supporting other major currencies. British pound was
up 0.5% and the Euro was up 0.5% against the US dollar for the week.
•Rising bond yields affected global equities performance this week. In the
US, S&P 500 index was down 1.8%, Dow Jones Industrial index was
down 1.9% and the NASDAQ index was down 1.6% for the week.
•Eurozone stocks did not fare well for the week. The FTSE 100 index was
down 2.3%, German DAX index was down 2.5% and the French CAC40
index was down 1.3% for the week.
•Asia stocks also took a hit following US stocks trend for the week.
Japan’s Nikkei index was down 1.5%, the Hang Seng index was down
1.4% and the Shanghai Composite index was down 2.8% for the week.
•Oil prices were down for the week despite picking up on a daily basis
when survey results indicated compliance with the OPEC-led production
cut agreement. Ongoing concerns about US shale production continues
to threaten oil price performance. Light crude oil was down 0.1% and
Brent crude oil was down 0.9% for the week despite strong performance
year to date.
02 February
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KFM Weekly Investment Update: Friday, 02nd of February 2018