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KFM Weekly Investment Update: Friday, 04 August 2017

Local Market Summary:

•Peter O’Neill was re-elected to serve his second term as a Prime Minister (PM) for the independent state of Papua New Guinea. PM O’Neill said that his government plan to correct the past mistakes and make improvements. PM O’Neill further said his coalition government agreed to cater for the well-being of the country through economic empowerment and deliver quality services in education, healthcare and infrastructure. Meanwhile, Manus MP Job Pomat was also appointed as the Speaker of the 10th parliament

•The Treasury department released the Mid-Year Economic Fiscal Outlook (MYEFO) this week. Highlights in the MYEFO report include public debt expected to increase by K4.3m to K25.9bn compared to budget estimate of K22.0bn attributed to rolling over of Government Treasury Bills (TBills) and increase in TBills financing. The increase in debt level would bring the debt-to-GDP ratio to 34.9% which is higher than the PNG Fiscal Responsibility legislated limit

•According to the MYEFO report, PNG economy is expected to grow at 2.7% while inflation is expected to be 6.8% for the full year 2017. The government will continue to face challenges in controlling expenditure against the backdrop of lower revenue streams.

•The World Bank is looking to roll out new mapping tools by way of a form of online solar power atlas to assist countries in the Pacific region identify optimal locations to develop solar energy. In their presentation at the regional energy summit held in Samoa, the World Bank said that they have received great interest from members of the region in developing such a took and explained that the tool can help provide crucial information during the planning and investment stages of solar power projects in the Pacific region. Renewable energy sources such as solar and wind provide a greener alternative in the power industry and attract a fair amount of investor interest.

•Kina Securities Limited (KSL) announced the establishment of a new USD correspondent banking arrangement with leading ASEAN bank, CIMB Bank. Kina MD and CEO Syd Yates said that KSL was pleased to establish the agreement with CIMB to become the correspondent banking partner for USD and SGD transactions. According to Mr Yates, the correspondent banks would facilitate cross-border payments on behalf of other financial services companies in a different location. Mr Yates also said that the announcement of a new correspondent banking partner followed Kina’s recent signing of a trade finance agreement with the Asian Development Bank (ADB).

•Moreover, the agreements with ADB and CIMA will further assist Kina’s with international client’s trading activities. This deal also gives confidence to Kina’s framework for managing international traction risks

•This week’s BPNG auctions in Central Bank Bills were offered for 28 days and 63 days with an over-subscription of K65.5m of the total amount of K514.0m offered, The weighted average yield for 28 days increased by 0.01% to 1.37% from 1.36% from the prior week and 63 days at 2.35%

•This week’s BPNG auctions in Treasury Bills were under-subscribed by K38.5m out of a total amount of K146.4m on offer demonstrating consecutive decline in appetite for longer dated securities. Weighted average yields for terms 182 remained unchanged at 4.74% while 273 and 364 days increased by 0.02% and 0.01% to 6.70% and 7.97% respectively

•The KSi Index decreased from the previous week at 1.2% to end at 4,984.22 due to negative movement in CCP,OSH & BSP share price and KSi Home Index also decreased by 1.4 % to end at 11,002.72 points

International Market Summary:

•The Reserve Bank of Australia (RBA) released its Statement on Monetary Policy today which revealed it has downgraded its forecast for Australian economic growth on the back of a strong Australian dollar while predicting a recovery in the next few years as inflation reverts to its normal levels

•Oil is back at US$50 per barrel supported by market rally and most analysts predict the momentum is likely to dissipate from here. However, US Energy Information Administration’s data release indicates crude oil inventories continue to fall in US and a slowdown in shale oil drilling may continue to support the rally despite increased in supply is expected from other major oil exporting countries

•Asian equity markets were down for the week as investors look to the US Jobs data for July due to be released for signs of improving labour market which could be seen as a positive factor in the Fed’s decision on further interest rate hikes later in the year. Shanghai composite was up 0.5% and Hang Seng wsa up 2.0% for the week.

•European’s major economy is possibly gained transaction due to German’s industrial orders increased double as much as expected in June as domestic demand hasty. According to the data from June showed that domestic demand increased

•PGK/USD remained unchanged for the week to close at 0.3145 while PGK/AUD appreciated 0.6% to end at 0.3971 and AUD/USD drop to 0.6% to end the week at 0.7921

Click the link below to view the full report in PDF.

pdfKFM Weekly Investment Update: Friday, 04th July 2017

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