KFM Weekly Investment Update: Friday, 12 May 2017

Local Market Summary
• Moody’s rated Papua New Guinea (PNG) B2 reflecting significant pressure on government financing, continued weak GDP growth and external liquidity amid low commodity prices. Credit challenges also stem from weaknesses in governance and security, low incomes, poor infrastructure and political risk. Balancing these, PNG’s credit strengths include strong growth potential supported by natural resources wealth, albeit rising government debt
• According to Moody’s forecast, PNG’s real GDP will grow at around 3% in the coming years, much slower than previous years. Stronger mining and agricultural production and construction of APEC summit might support output in the near term. However, fiscal tightening, high inflation and a shortage of foreign currency will weigh on consumption and investment
• Furthermore, Moody’s highlighted that downward rating pressure could develop as a result of (1) a re-emergence of wide fiscal deficits, leading to a rapid rise in government debt; (2) deteriorating growth prospects that ultimately weigh on fiscal and debt sustainability; and (3) a further decline in foreign currency reserves that increases external payment risks
• An agreement was signed between Asian Development Bank (ADB) and Kina Bank for ADB to provide a credit guarantee facility through its Trade Finance Program (TFP) that will support $4.0m of trade to PNG annually. ADB’s Director for Private Sector Financial Institutions Division, Christine Engstrom said with ADB’s support, Kina Bank will grow its trade finance operations that will support local importing and exporting businesses.
• Furthermore, Kina Group’s CEO, Syd Yates stated that ADB’s TFP program will facilitate Kina Bank to leverage the AAA international rating of ADB to add value to client’s international trading activity
• Independent Consumer and Competition Commission (ICCC) confirmed that fuel prices have increased due to an increase in Import Parity Prices on global crude oil prices. Customers in Port Moresby will pay an additional 6.78 toea per litre for petrol, 4.32 toea for diesel and 4.81 toea for kerosene. The cost of petrol is now 318.36 toea, diesel 260.11 toea and kerosene 244.38 toea per litre. Fuel prices for other centres will vary due to freight cost
• ExxonMobil PNG has now shipped 300th cargo of Liquefied Natural Gas (LNG) from PNG LNG project since the first shipment on 25th May 2014. This was revealed by a spokesperson from ExxonMobil PNG Ltd. According to the company, it produced 7.9m tonnes of LNG in 2016 which is an increase of 14.0% from the design specification of 6.9m tonnes per annum
• NASFUND Contributors Savings and Loan Society (NCSL) reported a Net Profit to K4.0m in 2016, down 28.6% or K1.6m from K5.6m on previous corresponding period (pcp). In light of the above, the company generated a total revenue of K14.9m in 2016 largely supported by investment and lending revenue. Notwithstanding the above, NCSL’s Net Assets decrease to K14.9m from K15.9m on pcp
• The Board of Kina Asset Management announced a final dividend of 4 toea per share for the year ending 31 December 2016. The stock will trade ex- dividend on 22 July 2017 with payment to be made on 12 July this year. The board also announced that the company would offer shareholders the opportunity to increase their shareholdings by participating in the dividend reinvestment plan
• This week’s BPNG auctions in Central Bank Bills were offered for 28 and 63 days with an over-subscription of K70.0m out of a total of K329.0m on offer. The weighted average yield were 1.22% and 2.33% respectively
• This week’s BPNG auctions in Treasury Bills were over-subscribed by K11.0m out of a total of K218.2m on offer. Weighted average yields for 182 days, 273 days and 364 days were 4.73% , 6.59% and 7.86% respectively
• The KSi Index remained unchanged at 5,098.34 points. Meanwhile KSi Home Index rose by 0.1% to conclude the week at 11,086.39 points, reflecting an increase in share prices of BSP and OSH
International Market Summary
• Westpac Banking Corporation (WBC) announced a net profit of AU$3.9b (K9.48b), up 6.0% for the first quarter of 2017 financial results compared to preceding period. This reflects with earnings per share of 119.8 cents, up by 1% and equity return of 14.0%. WBC also announce a 94 cents per share interim dividend. Westpac CEO Brian Hartzer said it was a solid result for the firm given the challenging operating environment
• The Australian market opened lower following a weak lead from U.S market overnight. The S&P/ASX 50 benchmark lost 0.4% to conclude the week at 5,813.20 points
• US stocks dropped this week following unexpected falls in sales from large department stores while investors are baffled by continued Washington’s political drama. The Dow Jones Industrial Average finished down 0.4% at 20,919.42 points
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KFM Weekly Investment Update: Friday, 12th May 2017