KFM Weekly Investment Update: Friday, 01 December 2017

Local Market Summary

• The Government released the 2018 Budget outlining their strategy in managing the economy. The Budget outlines three key areas identified for development. That is to change the declining trend for revenue, removing non-productive expenditure and improving debt management. Total revenue projected in the Budget is c.K12.7bn, total expenditure projection is c.K14.7bn resulting in a budget deficit of K1.99bn (2.2% of GDP) and Debt to GDP ratio of 32.2%

• Minister for Treasury Hon. Charles Abel issued an instrument to prevent excessive expenditure by Government agencies after the close of accounts. The instruction of the Public Finance Management Act and under Hon. Abel’s authority is to prevent the accumulation of a large cheque float at the end of the year which tends to happen when there are unspent appropriations and tendency for finance to raise a whole pool of cheques

• In addition, Hon. Abel stated during the PNG Mining and Petroleum Conference that the 800 accounts from various government agencies that operate outside the Government’s budget will be identified, cleaned out and placed into the Government’s budget. He added that an improvement of 18.0% from the 2017 Supplementary Budget in Government revenues for the 2018 Budget will be due to the measure taken and the process will be implemented following the introduction of new acts to be introduced in relation to the budget

• The People’s Micro Bank will become a commercial bank next year. This was revealed by Minister for National Planning and Implementation Hon.Richard Maru. Hon. Maru said that for the past 3 years the People’s Micro bank became profitable and the government is tapping some money in the budget to prepare the bank to apply for a licence to become a full-fledged
commercial bank next year

• Announced by Yandera Copper project’s exploration manager Dr Nathan Chutas, the mine is aiming for production in 2024. Dr Chutas said the Yandera Copper project is set to become one of PNG’s most billion dollar potential projects relating to investment and the area of economic influence could span five or more provinces, including Madang, Western and Eastern
Highlands, Chimbu and Morobe province. He added that the Yandera project will be an important contributor to the treasury of PNG with upfront investment, foreign revenue, royalties and taxes

• Credit Corporation’s (CCP) chairman Sir Wilson Kamit, CBE announced the resignation of Mr Torquil Bowen as CEO of CCP (PNG) and its wholly owned PNG subsidiaries. The Board has accepted the resignation of Mr Bowen which was effective on 28 November and acknowledged him for contribution during his tenure to CCP PNG and its subsidiaries

• This week’s BPNG auction results in Central Bank Bills offered for the 28 day term was under-subscribed by K10.0m out of the total amount of K230.0m offered indicating a decrease in appetite for shorter dated securities. The weighted average yield for the only term, 28 days increased by 0.01% to 1.41% from the previous week

• This week’s BPNG auction results in Treasury Bills were under-subscribed by K70.1m out of a total amount of K172.3m on offer. Weighted average yields for 182 days, 273 days and 364 days remained unchanged at 4.73%, 6.76% and 8.03% respectively from the previous week

• The KSi Index increased by 3.0% to end at 5,452.95 points underpinned by an increase in BSP at K9.60 while the KSi Home Index decreased by 0.6% to end at 11,015.87 points reflecting the drop in share price of CCP at K1.69

International Market Summary

• According to the US Commerce Department, economic growth for the third quarter was the highest in three years boosted by business spending and inventory growth. GDP growth for the rolling 12 months to September was 3.3% compared to 3.1% in June. This strong GDP data could be supportive for the Fed to raise rates come December

• OPEC and non-OPEC producers met in Vienna and have agreed to extend the agreement to cut production until end of 2018. Russia, a leading non-OPEC member, has been pushing for clarity around exit from the agreement to maintain stability for global oil prices. OPEC has also decided to limit the combined output from Nigeria and Libya, both of which were exempt from the agreement due to local political tensions

• PGK/USD remained unchanged for the week to close at 0.3115, PGK/AUD appreciated by 0.8% to end at 0.4117 while AUD/USD depreciated by 0.7% to end the week at 0.7568


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pdfKFM Weekly Investment Update: Friday, 01st of December 2017

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