KFM Weekly Investment Update: Friday, 09 September 2016

Local Market Summary:

• Prime Minister Hon. Peter O’Neill stated at the 47th Pacific Island Forum Summit in the Federated States of Micronesia that the Fisheries Task Force is working on a program called for by leaders to develop a program to increase economic returns from fisheries within 5 years. He further stated that improving economic returns from fisheries has positive implications for multiple stakeholders that not only includes fisheries operators and their employees but also associated sectors

• Mineral exports are expected to exceed last year’s figures on the back of improved global gold prices. Managing Director of Mineral Resources Authority, Mr Phillip Samar said that a 26.0% increase in gold price (to U$1300 per ounce) Year-to-date had increased export revenues. Mr Samar said that revenues as at July amounted to was K8.2bn. He further attributed turnaround in results to the resumption of Ok Tedi operations early this year

• Furthermore, on the industry, Mr Samar said that mining activity was lower than anticipated. He said exploration expenditure had observed a significant decline post the highs seen in the recent past from K595.0m in 2013 to K350.0m over the last three years

• During the Madang Investment Summit President for Ramu NiCo Management Mr Wang Jicheng announced that the success of the Ramu NiCo Project is because of the fact that the company had approached a new path of development and operation from Kurumbukari Mine to Basamuk Refinery which was different from the initial approach established by joint-venture partner Highlands Pacific in its feasibility study

• In addition, Mr Jicheng stated that Ramu NiCo as the biggest investment by Chinese enterprises in the South Pacific region and the largest overseas investment on mineral resources by Ramu NiCo Project is a significant milestone for Metallurgical Corporation of China on its path of developing overseas market despite the various difficulties and challenges incurred in the past

• Credit Corporation Ltd reported a net profit after tax of K64.6m for the first half of this year, up 22.0% from the previous corresponding period, largely attributed to investment gains driven by the increase in the BSP shares price from K7.45 to K8.10 during the half year. Chairman, Sir Wilson Kamit stated that the Group will continue to maintain its pre-eminent status as one of the region’s largest locally owned corporations with total assets of K1.3bn and shareholders’ equity of K767.0m

• Furthermore, Sir Wilson announced the introduction of an interim dividend for 2016 of 3 toea per share or K9.5m. He added that while business conditions remain subdued in the short term, the company is well positioned with an excellent business, strong capital, liquidity and a growing balance sheet. The Board also resolved to suspend the Dividend Reinvestment Plan going forward

• The BPNG Kina Facility Rate for September is maintained at 6.25%

• This week’s BPNG auctions in Central Banks Bills were offered for 28 days and 63 days only with an under-subscription of K498.0m out of a total of K507.8m on offer. The weighted average yields were 1.15% and 2.36%, respectively

• This week’s BPNG auctions in Treasury Bills were offered for 182 days and 364 days with an under-subscription of K109.5m out of K247.9m on offer indicating weak appetite for the short term securities. Weighted average yields were 4.7% for 182 days and 7.7% for 364 days

• The KSi Index remained unchanged for the week to close at 4,804.66 points. The KSi Home Index was up by 0.5% to end at 10,347.20 supporting an increased in banking stock Bank of South Pacific up by 0.6% to end at K8.80

International Market Summary:

• The European Central Bank caught markets off guard on Thursday when it announced that it would not extend the deadline of its bond-buying program. It also lowered its growth and inflation forecasts for 2017 and 2018

• US stocks dipped on Thursday, despite a surge in oil prices, as the market absorbed the European Central Bank’s latest monetary policy decision and remarks made by its president, Mario Draghi. The Dow Jones industrial average shed about 50 points , with Apple contributing the most losses while The S&P 500 fell approximately 0.2% with information technology lagging

• Australian shares declined for the fourth consecutive week after receiving news that the European Central Bank would not extend its monetary stimulus program. The benchmark S&P/ASX 200 Index and the broader All Ordinaries Index each fell 0.8 per cent end at 5339.0 points and 5440.0 points, respectively

• Oil prices rose more than 4.0% on Thursday on the back of news from the US Energy Information Administration that crude stockpiles dropped by 14.5 million barrels to 511.6 million barrels, the biggest weekly drop since January 1999. The drop in crude stockpiles is being further supported by oil production disruptions from storms in the Gulf

• PGK/USD remained unchanged for the week to end at 0.3155, PGK/AUD depreciated by 1.4% to close at 0.4124 caused by an increase in the AUD/USD up by 1.4% to close at 0.7652

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pdfKFM Weekly Investment Update: Friday, 09 September 2016

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