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KFM Weekly Investment Update: Friday, 07 November 2014

Local Market Summary

• The Bank of Papua New Guinea (BPNG) stated that the PNG government spent K5.2b for half-year expenditure. This represents 35.2% of the appropriated budget for 2014. As stated in BPNG’s June quarterly economic bulletin the expenditure of K5.2 is 9.9% higher than for the same period last year.

• The Chairman of Rural Industries Council, Sir Brown Bai reported that the government has been urged to institute an agricultural development plan to improve the sector as it is a vital component of the GDP. He added that PNG had a lot comparative advantages in exporting local goods however production wasn’t enough due to the sectors financial capacity in processing local crops to meet international demands.

• NASFUND announced the expansion of its management team to comply with the BPNG regulatory Pruden.al Standards. The fund has confirmed the appointment of persons in the position of Chief Investment Officer, Board Secretary, Chief Finance Officer and Chief Legal Officer with Chief Risk Officer position created but yet to be occupied. This expansion is believed to specialise the operation of the functional areas and reduce the workload before the current management team.

• BSP reported a Net Profit after Tax (NPAT) of K122.0m in Q3 2014 which is down K4.2m (3.2%) compared to K126.0m in Q2 2014. However was up K17.0m (16.3%) compared to K105.0m as reported in the previous corresponding period (pcp). Q3 2014 group revenue dropped 6.7% to K377.0m from K404.0m (Q2 2014). This was mainly driven by lower foreign exchange earnings as a result of margin contraction and lower turnover. BSP’s channel revenue and domestic interest income continues to demonstrate normal growth. BSP revenue streams (interest income and fees and commissions) are on track and budget, whilst FX revenues have reduced (refer to graph in the PDF attachment below).

• Kina Petroleum Limited (KPL) announced that former Inter Oil CEO, Mr. Phil Mulacek, though his private company PIE Holdings LP has taken 19.9% stake in KPL at A$0.30 per share for about A$18.0m. CEO of KPL Mr. Richard Schroder in welcoming Mr. Mulacek’s acquisition said the company is now in an enviable position to tap into his knowledge base as KPL sets out to immolates Inter Oil’s success.

• This week’s BPNG auctions in Treasury Bills were under subscribed by K22.2m with a total of K57.7m bids successful. The weighted average yield was 4.6% for 182 days and 7.4% for 364 days respectively.

• The KSi index declined by 0.2% to 3,795.08 similarly KSi Home Index dropped 0.2% to end the week at 9,877.17.

International Market Summary

• As the week closed, US stocks rose, sending benchmark indexes to records, as the European Central Bank vowed to increase stimulus efforts if needed and a drop in American jobless claims bolstered optimism in the economy. Both the Dow Jones index and S&P 500 index rose 0.6% overnight almost reaching 52-week highs.

• Early this week for the 15th consecu.ve month the Reserve Bank of Australia le=the cash rate unchanged at 2.5% in light of the sustained strength of the Australian dollar.

• US treasuries fell for a second day after a report showed first-.me claims for unemployment benefits in the US dropped more than forecast last week, adding to evidence the world’s biggest economy is accelera.ng. US bond yields at 5Y was 1.5% and 10Y was 2.38%.

• Both light and brent crude fell 3.7% and 4.0% ending the week to $77.55 from $80.93 and $82.39 from $85.95 respectively. The Organisation of Petroleum Expor.ng Countries reduced all forecasts for crude through to 2035 except 2015, as stated in the group’s annual World Oil Outlook. Further, Libya made intention to continue production from its biggest oil field that was halted after an attack. Sharara field was shut as a precaution after gunmen stormed the on-site production compound, Mansur Abdallah, director of oil movement at the Zawiya refinery and oil port, said in an interview.

• Gold fell 3.3% closing at 1,132.9 for the week from 1,186.6 in the last week to a fresh four-and-a-half-year low as brighter US economic data bolstered the dollar and European Central Bank President Mario Draghi hinted at a more aggressive stimulus program.

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

pdfKFM Weekly Investment Update: Friday, 07 November 2014

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