KFM Weekly Investment Update: Friday, 31 August 2018 - Kina Bank

KFM Weekly Investment Update: Friday, 31 August 2018

•Deputy Prime Minister (PM) and Treasurer Hon. Charles Abel presented the 2019 Budget Strategy Paper in Parliament implying expectation in the monetary plan for next year. The 2019 proposed budget indicated increase in total expenditure, net lending, revenue and grants, while a decrease in budget deficit of K1.9bn, as per the 2018 projected Mid-Year Economic and Fiscal Outlook. Mr Abel believed the proposed reduction in deficit budget was intended to ease the pressure on the domestic debt market of the funds
•Mr Abel and Minister for Agriculture Hon. Benny Allan launched the model rice production project at Pacific Adventist University (PAU) outside Port Moresby. The model rice farm was a partnership between PNG and Philippines government through the Department of Agriculture, Livestock and Fisheries in collaboration with PAU. This project was the result of bilateral meetings between the PM of two countries during the APEC summit last year held in Vietnam
•The National Airport Corporation (NAC) signed K78.9m worth of four contracts with Asian Development Bank (ADB) to upgrade Tari, Kiunga and Kerema airports. The signing of contract was a milestone for NAC to execute all the contracts to deliver improved levels of safety, security and services for all users of the three airports under the Civil Aviation Development Infrastructure Program (CADIP) between the government and the ABD. Civil Aviation Minister Hon. Alfred Manase urged the contractors to deliver within the time frame and budget as the loan would expire in November next year
•Foreign Exchange inflows continued to improve in the recent months, despite economic indicators indicated subdued in economic activity. The Bank of Papua New Guinea (BPNG) revealed that the declined was mainly underpinned by temporary shutdown of the LNG production facilities and the two giant mines of Ok Tedi and Porgera following the February earthquake, though improvement in private sectors. Due to downturn trend, BPNG maintained a neutral stance in monetary policy, by keeping the Kina Facility Rate at 6.25% throughout the 1st quarter of 2018
•New Britain Palm Oil (NBPOL) Group Chief Executive Officer (CEO) Mr Jamie Graham announced the significant strategic acquisition of Markham Farming Company (MFCL) by NBPOL at US$52.6m (K173.6m) with the outstanding net debt of US$11.0m (K35.9m) following a share sale and purchase agreement. According to NBPOL, the final purchase would be subjected to the findings of post-completion audit. MFCL was the largest coconut oil exporter in PNG prior to the acquisition and would enable NBPOL to expand its Lauric oil business into coconut oil production
•Kina Securities (KSL) CEO, Mr Greg Pawson announced the company’s net profit of K20.6m for the half year ended 30 June 2018 compared to K10.0m from the previous corresponding period (PCP). Mr Pawson said, the increase in net profit was largely attributed to the foreign exchange business and also backed by strong interest income via loan growth. On that note, KSL also announced an interim dividend of K0.10 and AUD0.04per share. The dividend Ex-date is on 29/08/18 to be payable on 27/09/18
•This week’s BPNG auction in Central Bank Bills were under-subscribed by K106.5m out of the total amount offered K610.5m. This indicates that there was no appetite for the shorter dated securities. The weighted average yield for 28 days remain unchanged at 1.40% and 2.35% respectively from the previous week. There were no bids for 63, 91 and 182 days
•This week’s BPNG auction in Treasury Bills were over-subscribed by K3.7m out of the total amount offered K130.0m. This indicates that there was an increase in appetite for longer dated securities. The weighted average yields for 182 days remained unchanged at 4.73%, while 364 days increased by 0.12% to 8.05% from 8.04% from the previous week. There were no bids for 63, 91 and 273 days
•The KSi Index improved by 0.4% to close at 5,532.92 points attributed by the increase in share price of mining and exploration stock Oil Search by 1.0% while the KSi Home Index remained unchanged to at 11,262.12 points
International Market Summary:
•Global shares broadly advanced on bullish tailwinds as the US and Mexico reach a deal to replace the North American Free Trade Agreement and a market friendly sentiment generated by the Fed Reserve. The DJIA, S&P500 and Nasdaq closed higher by 0.8%, 0.9% and 1.8% to end at 25,986.92 points, 2,901.13 points and 8,088.36 points respectively
•Australian shares posted fresh decade highs as the local reporting season comes to a close, with particular strength in the banks and utilities pulling the market higher. The S&P/ASX 200 and S&P/ASX 50 both rallied by 1.2% and 1.3% to end at 6,247.30 and 6, 075.80 points respectively
•The British pound jumped sharply after the European Union’s chief Brexit negotiator, Michael Barnier said the Union was willing to offer UK an exceptional partnership. UK stocks dipped for the week by 1.0% to 7,502 points. The German DAX and French CAC40 indices strengthened over the week by 0.8% and 0.7% to 12,494 and 5,470 respectively
•Asian shares came under renewed pressure as a report, US President Donald Trump was preparing to step up a trade war with Beijing sent Chinese stocks lower and partially erased gains made in this week’s global rally. The Nikkei, Hang Seng closed higher this week by 1.2% and 0.8% to 22,865 and 27,902 points respectively while the Shanghai Composite closed lower by 0.2% to end at 2,725 points.
•Oil prices slipped slightly after hitting their highest levels in more than a month the previous day, on growing indications of disruptions to crude supply from Iran and Venezuela and after a drop in US inventories.

KFM Weekly Investment Update: Friday, 31 of August 2018