KFM Weekly Investment Update: Friday, 07 October 2016

Local Market Summary

• The Governor of Bank of Papua New Guinea (BPNG) Mr Loi Bakani announced that the Bank has injected US$395.0m (K1231.0m) to assist with poor performance of Forex Market. He said that the level of Foreign Exchange Reserves is expected to be US$1724.7m (K5466.6m) at the end of 2016. He also stated that the inflows of foreign currency have increased in the second quarter of 2016, especially in the sector of mining and agriculture. Furthermore, Mr Bakani stated that this has assisted in clearing import orders and thus has improved the depreciation of the Kina exchange rate

• The Administrative Secretariat of the Sovereign Wealth Fund (SWF) of Papua New Guinea (PNG) is expected to be formalised and set up at Central Bank by the National Government. This is according to BPNG’s Monetary Policy Statement for the month of September 2016. The Bank has sought external technical assistance to establish the Administrative Secretariat of the SWF

• Fiji and PNG are expected to normalise the trade issues between them. Fiji’s trade ambassador to PNG Mr Navitalai Tuivuniwai stated that a detailed assessment report will be sent to the Government for decision making purposes. The PNG Government, NAQIA and manufacturers have collaborated together in delivering vital information for this assessment report. Further, PNG Government has guaranteed long term commitment to free trade areas within the Melanesian Spearhead

• Nambawan Super Limited (NSL) has opened a new Service Centre in Kokopo to serve its clients. Chief Executive Officer of NSL, Mr Garry Tunstall said the new office provides a better and improved member experience with more ease and convenience, in a modern office environment. The upgrade of the regional offices is part of NSL’s operational performance on streamlining systems and processes and redefining a progressive organizational culture to serve members better

• The cost of internet is expected to drop by 90.0%. This was made possible by the installation of Neutral Internet Exchange Point (IXP) by National Information and Communication Technology Authority (NICTA). Chief Executive Officer to NICTA Mr Charles Punaha said that major players such as Bmobile, Telikom and Digicel have all agreed and supported this initiative. He stated that Google has also agreed to partner with the IXP facility and discussions are still underway

• Newcrest Mining (NCM) delivered a record of annual gold production of 900,000 ounces under NCM ownership in 2016 financial year. Chairman Mr Peter Hay said that NCM has agreed to sell 50.0% interest in the Hidden Valley mine in Morobe, it also retained its 50.0% ownership of the world class Wafi-Golpu copper and gold project

• In addition, NCM has declared in the latest 2016 Annual Report that the company has earned a statutory profit of US$332.0m and an underlying profit of US$323.0m. He also stated that due to the company’s improved debt position and profitability together with the consideration of capital requirements and market conditions, the board has agreed to pay a US$7.5 cent per share dividend

• This week’s BPNG auctions in Central Banks Bills were only offered for 28 days with an oversubscription of K472.0m out of a total of K444.8m on offer. The weighted average yields was 1.17%

• This week’s BPNG auctions in Treasury Bills were offered for 28, 91, 182 days and 364 days with an under-subscription of K107.3m out of K235.4m on offer indicating weak appetite for the short term securities. Weighted average yields were 1.2% for 28 days, 2.64% for 91 days, 4.7% for 182 days and 7.7% for 364 days

• The KSi Index remained unchanged for the week to close at 4,767.75 points while the KSi Home Index was down by 1.0% to end at 10,641.72 underpinned by a fall in banking stock Bank South Pacific down by 1.5% to end at K8.96

International Market Summary

• Major US benchmarks closed little changed ahead of September jobs market data, seen as key to determine whether the Federal Reserve will raise rates from ultralow levels before the year-end. However, gains in crude prices gave support to the impression that the US economy is strengthening

• European stocks closed slightly lower as investors also showed signs of concern ahead of much-anticipated US jobs market report. Further, the European Central Bank (ECB) Vice President Victor Constancio reportedly said there is no consensus to wind down bond purchases after it was reported earlier in the week that bank officials had reached an informal consensus to taper the ECB’s quantitative-easing efforts sooner than expected

• Market worries abroad sent Asian stock markets broadly lower early Friday as increasingly heated discussions over the UK’s exit from the European Union saw the pound plunging against the US dollar

• PGK/USD remained unchanged for the week to close at 0.3155 while the PGK/AUD closed higher by 0.5% to end at 0.4166 caused by a depreciation in the AUD/USD down by 0.7% to end at 0.7574


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