KFM Weekly Investment Update: Friday, 08 December 2017

Local Market Summary:

• Prime Minister Peter O’Neil has invited Chinese business leaders to attend the APEC 2018 CEO Summit in Port Moresby. He gave the invitation when attending the Fortune 500 Global Forum at Guangzhou province in China. He said the 2018 APEC policy agenda has a focus on digital economy which is vital for all economies

• Members of private sectors said that the 2018 National budget is stable despite challenges. Newcrest PNG Country Manager Peter Aitsi mentioned that the stability was due to no new tax charges which gave confidence to the investors. ANZ PNG CEO Mark Baker also stated that the government showed consistency in dealing with the current economic situations through its supplementary budget, the 100 Day Plan and the 2018 budget

• PNG is still experiencing the impacts of the drop in global commodity prices, according to a recent PNG Economic Update published by the World Bank Group. The report stated that GDP was at 8.0% in 2015 and 2.4% in 2016 with projection of 2.1% in 2017. However, the report reaffirmed that there is a positive outlook for agriculture commodities, especially Palm Oil and Vanilla due to improved weather and growing conditions. The report also highlighted that resources sector was the main driver for the overall GDP growth in 2017

• In the meantime, Country Director of World Bank Group, Michel Kerf said that the medium term fiscal and revenue strategies outlined in the 2018 budget proves government’s efforts to maintain the fiscal framework to cut spending from resource revenues and the commitment to establish the sovereign wealth fund. He further stressed that tough actions must be taken to contain wage bill costs that are draining key public services’ funds

• Tax Identification Numbers (TIN) will be a key requirement for every businesses opening a bank account. This was revealed by Deputy Prime Minister and Treasurer Charles Abel. He said key institutions involving Bank of PNG, Internal Revenue Commission and commercial banks are working towards enforcing the new measure taken in the 2018 National Budget

• The National Government is planning to cut annual rental bills of K250.0m for renting private buildings. Chief Secretary Issac Lupari said various options considered to cut costs include building of new offices and to fully occupy Central Government offices in Waigani. He added that the government will hold talks with Mineral Resource Development Company and Nambawan Super to build the properties under build, operate and transfer arrangements

• The Bank of PNG announced that the Kina Facility Rate for the month of December 2017 will be maintained at 6.25%

• This week’s BPNG auction results in Central Bank Bills offered for 28 days and 63 days were under-subscribed by K111.0m out of the total amount of K807.0m offered, indicating a decrease in appetite for shorter dated securities. The weighted average yield for 28 days remained unchanged at 1.41% from the previous week while 63 days was at 2.35%

• This week’s BPNG auction results in Treasury Bills were under-subscribed by K54.8m out of a total amount of K198.0m on offer. Weighted average yields for 182 days, 273 days and 364 days remained unchanged at 4.73%, 6.76% and 8.03% respectively from the previous week

• The KSi Index increased by 0.1% to end at 5,457.17 points underpinned by an increase in OSH by K17.92 while the KSi Home Index decreased by 0.9% to end at 10,917.37 points

International Market Summary:

• The positive performance in banks and tech stocks buoyed the European stock market up by 0.2%. European banks climbed 1.1% backed by financial sector while tech sector gained 0.2% bouncing back from few losses which drew concerns from investors about the valuable parts for the market

• Japan’s economy growth was doubled in the third quarter by 2.5% as a result of capital expenditure and exports. The capital expenditure component of GDP rose by 1.1% and net exports increased by 0.5% with contribution of inventories up by 0.4%.

• Growth results from Japan and China boosted Asian stock market. Japan’s Nikkei rose by 1.1% against the dollar while exports from Beijing recorded an increase up to 12.3% in November. Chinese imports also increased by 18.0%, particularly the imports of Iron ore and copper

• PGK/USD depreciated by 0.3% for the week to close at 0.3105, PGK/AUD appreciated by 0.4% to end at 0.4133 while AUD/USD depreciated by 0.7% to end the week at 0.7514

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pdfKFM Weekly Investment Update: Friday, 08th of December 2017

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