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KFM Weekly Investment Update: Friday, 01 June 2018

Local Market Summary:

● Prime Minister (PM) Hon. Peter O’Neill said that the government is meeting its obligations and managing cash flow through the implementation of the Public Money Management Regularisation. PM O’Neill told Parliament this week that the law was not designed to affect the operations of all state agencies but to ensure the accountability of money that belongs to the people and the country. The access funds that were budgeted and not spent must go back to the consolidated revenue.

Meanwhile, PM also said that the Government needs to establish a position so that this access funds that are being managed at self-will by individual agencies must be brought back to consolidated revenue as required by law

According to Deputy PM and Treasurer Hon. Charles Abel, the country’s total debt to date is more than K24.0b. Treasurer Mr Abel detailed the loan repayments on foreign and domestic debt at the Parliament sittings this week that K157.7m was paid for the first quarter on external debt, K46.3m was paid to the Bank of South Pacific, K3.3b on Treasury Bills and another K3.0b was raised in Treasury Bills proceeds. Hon. Able further said that the total foreign debt was K7.5b and domestic debt was K16.8b.These repayments and proceeds were all part of the 2018 budget execution which positioned PNG’s total debt at K24.4b

The Communication Minister Hon. Sam Basil suggested Papua New Guinea would ban Facebook for a month. The ban aims to analyse the effects of the website on residents and to take down fake profiles. Mr Basil also said that the ban period would allow time to collect information, identify, filter and remove users that upload inappropriate files, post false and misleading information on Facebook

The Mines regulator Mineral Resources Authority (MRA) revealed this week that Frieda Mine Project developer PanAust has indicated further alterations to its initial proposal for mine development thus holding back the Special Mine Lease (SML) application. This includes the relocation of the integrated storage facility to Frieda River from the Nina River and increasing the hydro potential to over 300 Megawatts. MRA also confirmed that PanAust’s application for the SML is on hold pending the company’s lodgement to the government indicating amendments to the development proposal

City Pharmacy (CPL) announced the new issue of 414,396 ordinary shares at K0.60 per share. The issue was purposely to provide consideration in the form of shares to Almana Holdings and Rolex in return for those companies underwriting in part of CPL’s 2017/2018 pro rata rights issue. Investors are advised that there will be no changes to the dividend policy

In addition, CPL Group Managing Director Mr Mashesh Patel confirmed the sale of Paradise Cinemas to Vision City Investment, a subsidiary of the RH Group for an undisclosed sum and Vision City would start managing the cinema business effective June 1, 2018. Mr Patel said that the move was on operationally and market driven, it also confirms his previously announced business strategy of CPL to sift company focus to core retail businesses on the 4 pillar strategies in health, food, shelter and lifestyle

Credit Corporation (CCP) and its subsidiaries recorded Core Operating Profit of K75.4m exclusive of valuation gains or losses for the year ended 31 December 2017. In contrast, the Group’s Net Profit after Tax fell 25.6% to K73.6m from K98.9m from 2016. This was due to the slowdown in CCP’s key activities in finance and property sectors.

This week’s BPNG auctions in Central Bank Bills were over-subscribed by K118.00m out of the total amount offered K333.9m. The weighted average yield for 28 days and 63 days remained unchanged from the previous week at 1.40% and 2.35% respectively

This week’s BPNG auctions in Treasury Bills were under-subscribed by K115.1m out of the total amount offered K201.9m. The weighted average yields for 63 days, 91 days, 182 days, 273 days and 364 days remained unchanged at 2.36%, 2.04%, 4.72%, 6.76 and 8.04% respectively from the previous week

The KSi Index dropped by 3.2% to 5,191 points and the KSi Home Index decreased by 7.3% to 10,304 points mainly attributed to decline in share price of banking and financial stock Bank South Pacific (BSP) by 8.3% to end at K9.05 and Mining stock Newcrest Mining (NCM) by 5.7% to K50.00

International Market Summary:

● US stocks continued to decline after the US Administration announced that they would impose tariffs on imports from Canada, Mexico and the European Union. Dow Jones Industrial was down by 1.4%, the S&P 500 was down 0.6% while the NASDAQ index was up 0.1% for the week.

Asian stocks took a hit this week but were able to recover this week on the back of decline in the Japanese Yen and strong export data from South Korea. Although ongoing concerns around the US protectionist policies continue to affect performance of stocks. Nikkei was down 1.2%, the Shanghai Composite was down 2.5% and the Hang Seng was down 0.6% for the week

European stocks had a bumpy week as markets watched with increasing concerns of possible Italian crisis if tensions pushed the country toward a new vote and possible Euro exit. However negotiations yielded a breakthrough resulting in a presidential announcement that the country’s new government would be sworn in today. The FTSE 100 was down 0.7%, the German DAX was down 2.6% and the CAC 40 was down 2.6% for the week

pdf KFM Weekly Investment Update: Friday, 01 of June 2018

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