KFM Weekly Investment Update: Friday, 27 October 2017 - Kina Bank

KFM Weekly Investment Update: Friday, 27 October 2017

Local Market Summary
• Hon. Prime Minister Peter O’Neil stated in his address at the Australia – PNG Business Council in Sydney the Government intention to increase business opportunities with Australia to boost productivity outside the resource sector. Given Australia is PNG’s largest investment partner that has the technical capacity to build key areas in the public sector, such as improving service delivery levels to the business community. Hon Peter O’Neil believes Australia’s involvement will eventually lift returns on investment that may assist with the Governments long term plans
• Lands Minister Hon. Justine Tkatchenko addressed concerns over properties & duplication of land title issues raised by three major asset financiers (commercial banks) after discussions with the Ministry of Lands and Physical Planning and their senior staff. Minister Tkatchenko outlined the issues to his department with instructions to improve the department’s service delivery turnaround time no more than two months to ensure timely processing and settlement of properties. He added that the lands offices in charge of each sections or region will be accessible five days in a week and their respective contacts will be made available to these banks for inconvenience
• According to Australian National University researcher, Rohan Fox, PNG is currently going through one of its worst economic downturn in its recent history after enjoying unprecedented economic growth during the PNG LNG construction era. Like other resource rich countries around the world, the PNG economy is being hit by lower resource prices, leading to lower than expected foreign exchange revenue. High inflation, budget cuts and even worse for the government to manage during this time is the additional pressure to repay high level of borrowings which it incurred during the boom period. However, the economy may be picking up, depending on the success of policies being made by the government and the central bank
• According to Mr Peter Aitsi Newcrest’s PNG Country Manager, Newcrest’s Lihir mine has injected around K422.0m into PNG’s economy during the September quarter alone with strong gold production. Newcrest’s contributions to PNG economy came in from royalty payments to landowners and taxes paid to the government. Apart from royalties and taxes, Newcrest also contributes to the economy through employment, investment in public infrastructure and services, purchasing goods and services from local suppliers and contractors. Newcrest is also pleased to contribute to the PNG Government’s 100 Day Plan on boosting the PNG Economy
• According to Coffee Industry Corporation (CIC), the number of Coffee Berry Borer (CBB)-infested gardens in Eastern Highlands has increased to 267 from the 12 identified in March this year. Chief Executive Charles Dambui in welcoming the government’s allocation of K5.0m to start mobilising labour, tools, and conducting awareness to manage the spread of CBB said rehabilitation and awareness efforts must continue. He advised that CIC was expecting more funding support in the 2018 national budget to be tabled in Parliament next month
• This week’s BPNG auctions in Central Bank Bills were offered for 28 days only with an over-subscription of K8.0m out of total amount of K349.5m on offer. The weighted average yield increased by 0.01% to 1.40% from the previous week
•This week’s BPNG auctions in Treasury Bills were over-subscribed by K50.4m out of a total amount of K120.3m on offer. Weighted average yields for 182, 273 and 364 days remained unchanged at 4.73%, 6.76% and 8.00% respectively from the previous week
• The KSi Index remained unchanged from previous week to close at 5,277.31 lifted by the rise in share prices of BSP and Kina Asset Management Ltd to end at K9.50 and K0.95 respectively. The KSi Home Index gain by 0.4% to close at 11,037.67 points
• Disappointing corporate earnings and a spike in bond yields has caused US stocks to fall on Thursday which also put both the Dow Industrials and S&P 500 index on track for their worst session in seven weeks
• On Friday, China’s statistics bureau said profits earned by China’s industrial firms in September surged 27.7% from a year earlier, accelerating from a 24.0% rise in August. A key factor contributing to the boost in profits earned by industrial firms was from a building boom and factory-gate prices
• Asian stocks rallied for the week underpinned by strong performance from tech stocks after US tech stocks such as Alphabet, Microsoft and Amazon released positive earnings results for the third quarter. Nikkei was up 2.6% and the Shanghai Composite index was up 1.1% for the week
• The Euro fell 0.2% against the USD and European bond yields fell and equities rallied over the week as the European Central Bank extended its bond-buying program. The German DAX was up 1.1% and the CAC40 index was up 1.5%. The German 10-year Bund yield dropped 6 basis points to 0.42%
• Oil prices saw another week of positive movement supported by news from Saudi Arabia supporting an extension of the OPEC-led agreement to cut production output
• PGK/USD dropped twice this week to 0.3115 from 0.3125 last week
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KFM Weekly Investment Update: Friday, 27 October 2017