KFM Weekly Investment Update: Friday, 16 December 2016

Local Market Summary

• The Australia Papua New Guinea Business Council (APNGBC) and the Australia Fiji Business Council (AFBC), together with the Australia Pacific Islands Business(APIBC) signed a three year Memorandum of Understanding (MOU) with the Australian Business Volunteers (ABV) which aims to improve sustainable business and social growth in the countries covered by these councils. Mr Greg Pawson and Mr Gary Clifford presidents to APNGBC, AFBC and APIBC respectively said in a joint statement that the MOU with ABV recognises the important role it plays in supporting business and economic growth in the Pacific Islands economies

• Mineral Resources Authority (MRA) has responded favourably to plans from the Government to double revenue levels from mineral incomes by 2030. The average mineral revenue between 2013 and 2016 is around K8.2b. The Government’s medium development plan of 2010 challenged the mining industry to double the mineral income by 2030. MRA said that to help achieve this, its geological survey division will initiate several survey programmes across the country by updating its existing mineral occurrence data and obtain new data to boost mineral exploration

• Air Niugini has launched its Business Travel Centre and the opening of its office in Port Moresby. Chairman Sir Frederick Reiher, confirmed that the centre will become a one stop shop to cater for the airline’s clients. Services offered will include ticketing for all airlines, hotel bookings, rail bookings, car hire bookings and all other services the modern-day corporate client demands. The airline also paid K20.0 million as its dividend to the Government during the launching

• In addition, Air Nuigini has voiced concerns about the Government’s decision to increase the departure tax to K114.0 from K30.0 and has described this move as being counterproductive as this would adversely impact the tourism sector. Board chairman, Frederick Reiher confirmed that Air Niugini will be making a submission to the Government to review this decision

• InterOil (IOC) and ExxonMobil entered into an Amended and Restated Arrangement Agreement (the Amended Agreement), which among other items, extends the outside date of the transaction to March 31, 2017. Under the terms of the amended agreement ExxonMobil agreed to purchase all issued and outstanding common shares of IOC for consideration consisting of US$45.0 per share payable in ExxonMobil shares and a contingent resource payment (CRP)

• Furthermore, the CRP will provide for an additional cash payment of approximately US$7.1 per IOC share for each trillion cubic feet equivalent (tcfe) gross resource certification of the Elk-Antelope field above 6.2 tcfe, up to a cap of 11 tcfe of certified resource. This is an increase from the July Arrangement Agreement, which was capped at 10 tcfe, representing an increase in total potential consideration to approximately US$78.9 per IOC share from approximately US$71.9 per share. The termination fee that may become payable by the Company in certain circumstances has been increased from $67.0m to $100.0m

• In response to recent media speculation regarding a possible secondary listing of Bank South Pacific (BSP) on an offshore exchange, BSP Chairman, Sir Kostas Constantinou announced that it is considering various options as to how it may improve the liquidity of its share register. He confirmed that one of the options being considered was a potential dual listing of BSP stock in a jurisdiction that is both appropriate in terms of achieving increased liquidity and effective in terms of governance standards and business rules that are fundamentally consistent with POMSOX

• This week’s BPNG auctions in Treasury Bills were undersubscribed by K508.5m out of K726.3m on offer. Weighted average yields were 2.61% for 91 days, 4.72% for 182 days and 7.74% for 364 days

• The Kina Securities Index remained unchanged to close at 4,813.40 points, while the Kina Securities Home Index was up by 0.1% to close at 10,641.77 points supported by an increase in share price of Credit Corporation up 0.5% to end at K1.90

International Market Summary

• The US Fed raised the federal funds rate by a quarter of a percentage point, moving from 0.25%-0.50% to a range of 0.50% and 0.75%. The Fed noted that inflation had increased but was still below the Committee’s 2.0% longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports. The interest-rate decision follows a two-day meeting of the Federal Open Market Committee.

• Japan’s Nikkei share average rose on Friday, set to mark a nine-day rally after tracking gains in strong US shares while weak yen continued to help overall sentiment.

• European shares rose on Thursday, helped by gains in global banks after the Federal Reserve raised US interest rates, while growing corporate deal activity underpinned year-end optimism

• Australian shares closed at their lowest on Friday, weighed down by a stronger US dollar which hurt precious metal miners and oil stocks, as investors ponder the likelihood of more interest rate hikes in the US in 2017 than had been expected. The S&P ASX 200 was down 0.5% ending at 5,532.90 points

• Oil prices rose on Friday after Kuwait appeared to be lining up bigger supply cuts than had been initially expected from January as part of a coordinated effort by oil producers to drain a global glut

• PGK/USD remained unchanged for the week to close at 0.3150, PGK/AUD rose by 1.4% for the week to end at 0.4279, while AUD/USD depreciated by 1.4% to end the week at 0.7362


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pdfKFM Weekly Investment Update: Friday, 16 December 2016

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