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KFM Weekly Investment Update: Friday, 09 May 2014

Local Market Summary

• The Governor of the Bank of Papua New Guinea, Loi Bakani issued a warning in the bank’s quarterly economic bulletin for December 2013 advising the State and other stakeholders in the LNG project, not to raise too much expectations of windfall revenue inflows in the first year of production as inflows will most likely be used to repay risk capital and loans associated with the LNG operation.

• In a ruling this week, the Singapore High Court dismissed the State of PNG’s application to take control of PNG Sustainable Development Program’s (SDP) assets. Following the dismissal the State is considering legislation to outlaw SDP’s operations.

• The PNG Power board of directors has acknowledged its problems and must be “brought back on track’’. In announcing reinstatement of suspended CEO John Tangit, the board confirmed that the independent investigation of allegations made against the CEO would continue and that board and management would have a PPL Strategic Planning workshop to look at the key areas of concern.

• Independent Consumer and Competition Commission (ICCC) acting CEO Elastus Geroro commented this week that the increased petrol, diesel and kerosene prices this month was mainly due to the depreciation of the Kina and the high logistics costs.

• The Papua New Guinea Trade Union Congress has made a submission to the Minimum Wages Board to increase the minimum wage from K2.29/hour to K3.63/hour. The union group also asked for automatic escalation consistent with CPI movements which would entail an increase to K3.87/hour for 2015, K4.06/hour for 2016 and K4.26 for/hour for 2017.

• The PNG Coffee industry was challenged by Colin Smith, the team leader of the delegation from the Specialty Coffee Association of Europe, to create demand in the European market by participating in International coffee expositions and fairs.

• Melanesian Trustee Services Ltd (MTSL) announced a profit increase of K109.8 million for the 2012 financial year (compared to K48.2 million in 2011).

• Marengo Mining Ltd signed a loan facility of US$3 million (K8.2 million) with major shareholder Sentient at 9% per annum and to be repaid quarterly.

• NBPOL reported a record profit before tax of USD32.4 million for the March quarter 2014. The uplift in the profit margin was due to increased production rate (up 22.14% compared to pcp).

• Bank South Pacific Limited (BSP) announced cessation of its eight weeks Management Trading Period effective as at 1 May 2014.

• The bids in the Bank of PNG’s Central Bank Bills and Treasury Bills Auctions were undersubscribed. The weighted average yield (WAY) for 182 and 364 day Treasury Bills were up six and seven basis points to 3.66% and 5.95% respectively.

• The Kina Facility Rate (KFR) remained unchanged at 6.25% from last month.

• The KSi Index closed the week flat at 3,654.07 followed suit by the KSi Home Index also closed the week flat at 8,088.74.

International Market Summary

•European shares lifted to near six year highs on Thursday following reports that European Central Bank look to engage more stimulus measures. The German Dax lifted by 0.9% and the UK FTSE rose by 0.6%. Refer to graph in the PDF attachement below)

• According to reports from Bloomberg, Bank of Japan (BOJ) has opted to refrain from expanding monetary stimulus as inflation forecast revealed increasing pace for the next 2 financial years to reach 2% goal.

• The Reserve Bank has left the cash rate at a record low of 2.5 per cent for the ninth consecutive month, but hinted at the possibility that the unemployment rate in Australia has already peaked in the current economic cycle.

• The PNG Kina was down against the USD and AUD 0.9% at 0.3542 and 1.7% 0.3785 respectively for the week.

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

pdfKFM Weekly Investment Update: Friday, 09 May 2014

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