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KFM Weekly Investment Update: Friday, 05 November 2014

Local Market Summary

• The 13th PNG Mining and Petroleum Investment Conference began this week in Sydney with the theme “PNG Resources – Expanding Horizons”. PNG Prime Minister Hon Peter O’Neill reiterated on the government’s role which is to ensure investor confidence. He urged current and future investors to maintain confidence and assured that the government will, on their part, pursue policies consistently and with certainty.

• Mining Minister Hon Byron Chan announced at the conference that PNG expects to see about 5 mining development projects with a combined capital investment expected to exceed US$10.0b (K25.0b) within the next 10 years.

• Digicel Business launched its International Private Leased Circuit (IPLC) Service with in Sydney this week. IPLC is a private dedicated point-to-point circuit that can be used by any organization in PNG to communicate with offices that are geographically dispersed throughout the world. The service can be used to exchange business data, to do video conferencing and any other forms of telecommunication.

• Since the first export in May this year, ExxonMobil PNG to date has sold more than 45 cargoes from its LNG project, Managing Director Mr Peter Graham said in Sydney this week. The National Petroleum Company of PNG further noted that a single shipment costs between US$50-60m.

• Kulim has accepted the GBP547.0m offer made by Sime Darby Plantation to acquire a 51.0% stake in New Britain Palm Oil. In a meeting this week, Kulim’s board of directors said the company had approved the offer made by Sime Darby. Hence, this would result in the Kulim selling its entire equity of 73.5m shares at the offer price of K28.79 or GBP7.15.

• Oil Search (OSH) has made a bid in excess of US$300.0m (K787m) to acquire Canadian energy company Talisman Energy’s assets in Western Province, with a plan to enhance the expansion of OSH gas-export facility. This deal would assist Talisman to meet a goal of US$2.0b (K5.0b) in asset sales by mid-2015.

• South Pacific Post (Post Courier) reported a gross profit of K5.6m, marginally lower compared to K5.8m in the previous year. Company chairman Mr Keith Brodie revealed at the AGM this week further stating that the lower than expected return was attributed to the down turn in the PNG economy due to the end of construction phase of the PNG LNG project as well as the appreciation of the Kina against the Australian dollar.

• Kina Finance Ltd this week launched an innovation variation of the Novated Lease designed to broaden access to vehicle financing for senior PNG employees.

• The Kina Facility Rate released by the Bank of PNG will be maintained at 6.25% for the month of December 2014.

• This week’s BPNG auctions Treasury Bills were under subscribed by K79.0m for 182 days with a weighted average yield of 4.6% and K25.3m for 364 days with a weighted average yield of 7.4%.

• The KSi index declined by 1.3% to 3,603.16 while KSi Home Index rose 0.4% to end the week at 9,860.66.

International Market Summary

• US stocks fell on the heels of declines in Europe after the European Central Bank said it would table additional stimulus efforts until early next year. The DJIA and the S&P500 closed the week marginally up 0.4% and 0.2% at 17,900.10 and 2,071.92 respectively.

• European shares sank after the European Central Bank stuck to its line that it will decide early next year whether further measures are needed to boost the euro zone economy, sparking a bout of profit-taking. The FTSE and DAX closed the week lower at 6,679.37 and 9,851.35 respectively.

• Oil prices fell in London and New York helped by reports that Saudi Arabia has trimmed its export prices and is doing nothing to tighten supplies. Brent Crude closed the week 1.3% lower at USD66.22 per barrel.

• Australia’s relatively attractive bond yields have helped temper the currency’s decline. The 10-year yield closed at 3.07% on 04/12/14, down from 4.24% in January.

• The Australian dollar slipped to a 4 year low at US¢83.56 on the back of speculation that the Reserve Bank will reduce interest rates early 2015. (Refer to graph below in the PDF attachment below).

• Gold futures have ended lower after the European Central Bank stood pat on monetary policy and as investors brace for upcoming US employment data.

• To end the week, PNG/USD closed lower 0.4% at 0.3899 while PGK/AUD appreciated by 0.9% from 0.4572 to 0.46757.

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

pdfKFM Weekly Investment Update: Friday, 05 December 2014

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