KFM Weekly Investment Update: Friday, 11 August 2017 - Kina Bank

KFM Weekly Investment Update: Friday, 11 August 2017

Local Market Summary:
•The first National Trade Policy was launched by Deputy Prime Minister Charles
Abel. Mr Abel when launching the new trade policy said international trade and
investments are the key drivers in the growth of an economy and this policy will
provide a road map to guide PNG to be an internationally competitive economy
driven by expanding domestic market
•In the meantime, Mr Abel also announced the government’s plan to end tax
holidays for companies. He said the government used tax holidays in the past to
attract investments when the economy was in need of foreign capital. However, he
said this will be aborted as PNG is becoming more of an attractive investment
•Institute of National Affairs executive director Paul Barker when responding to the
government’s plan to end tax holidays for companies stated that PNG needs a
steady set of taxes. Mr Barker said the country required standard investment
conditions that applies to all investors, with specific and competitive conditions for
specific sectors, such as mining, petroleum, gas and forestry. He reiterated that
sound and stable investments conditions attracts and keeps long term investors
•According to EU Ambassador to PNG Ioannis Giogkarakis-Argyroplous, export
from the country to European Union markets have increased during the last five
years from K1.7b to 2.5b. He said this was the result of PNG outsmarting production
capacity and attracting investors in the fisheries sector
•Independent Consumer and Competition Commission (ICCC) advised that fuel
prices have increased due to an increase in Import Parity Prices (IPP). Petrol prices
rose by 4toea to K3.06, diesel increased to K2.53 by 8toea and kerosene went up
by 6toea to K2.36. Commissioner and CEO Paulus Ain said the increase in the IPP
was caused by the rise in the Mean of Platts in Singapore last month
•Acting Managing Director of Investment Promotion Authority (IPA) said companies
were failing to adhere to the notice that was announced earlier to submit annual
returns by 20th July 2017 and thus requesting the extension of the due date which
IPA cannot do. He said the submission of returns is in preparation for the
deregistration exercise scheduled at year end. He explained that once this is
complete, any company that has an outstanding return will be deregistered
•The Bank of PNG’s announced that the Kina Facility Rate for the month of August
2017 will be maintained at 6.25%
•This week’s BPNG auctions in Central Bank Bills were offered for 28 days and 63
days with an under-subscription of K2.0m of the total amount of K439.0m offered,
The weighted average yields for both 28 and 63 days remained unchanged at
1.37% at 2.35% respectively
•This week’s BPNG auctions in Treasury Bills were under-subscribed by K156.6m
out of a total amount of K361.1m on offer. Weighted average yields were 63 days
at 2.40%, 91 days at 2.49%, and 182 and 273 days unchanged at 4.74% and 6.70%
respectively. Meanwhile the 364 day term decreased by 0.01% to 7.96% from
7.97% from the previous week
•Both KSi Index and KSi Home Index remained unchanged for the week to end at
4,983.14 and 11,002.72 points respectively
International Market Summary:
•The global equity market was due for a correction and this week’s results for key
stock indices indicate that a trigger in the form of tensions between the US and
North Korea may have set this correction in motion. Tensions began when North
Korean state media revealed plans to launch for missiles towards a spot 30-40km
from Guam, a US territory in the Pacific Ocean. US President, Donald Trump
responded with several threats to North Korea which has exacerbated the situation
swaying investors toward safe haven assets such as the Japanese Yen, gold and
treasury bonds.
•The S&P 500 Volatility (VIX), or the ‘Fear index’ as it’s commonly referred to, was
down 1.6% indicating a major shift in investor sentiment during this time of
increased political tension between the two nations.
•US stocks were down by 2-standard deviation levels with the Dow Jones down
0.9%, S&P 500 down 1.4% and the NASDAQ down 2.1% for the week. Meanwhile
the Japanese Yen is down 0.9% against the USD and gold is up 2.1% for the week.
•Asian equity markets also slid for the week with the Nikkei down 1.1%, Shanghai
down 1.3% and the Sensex index down 2.1% for the week. This reflects concern
in in the region as two of the US’ allies, Japan and South Korea, have indicated
plans to take precautionary steps to address potential escalations in tensions
between the US and North Korea
•European shares were down for the week mainly due to cyclical factors in different
sectors rather than influence from the external political issues. The FTSE index was
down 1.6% while the German DAX was down 2.3% mainly due to index heavyweights
going ex-dividend and disappointing earnings results for major European
Click the link below to view the full report in PDF.
KFM Weekly Investment Update: Friday, 11th July 2017