KFM Weekly Investment Update: Friday, 10 April 2015

Local Market Summary

• Treasurer Hon Patrick Pruaitch says the fall in oil prices is taking a toll on the PNG economy. Total Government deficit increased to K2.9b compared with a projected deficit of K2.4b in the 2014 budget and total public debt outstanding rose to K15.4b last year compared with K11.9b in 2013. This caused public debt to gross domestic product ratio to increase from 34.6% to 37.7%. Mr Pruaitch said the Government needed to proceed with caution in the months ahead in view of likely reductions in revenue this year.

• The cocoa freight subsidy program has been effective in helping remote local cocoa growers in increasing their production. PNG Cocoa Board CEO Mr Boto Gaupu said the Government-funded program allowed cocoa farmers in rural areas to transport their products to nearby markets through service providers such as airlines and shipping companies. The Government gave K5.8m last year for the freight subsidy program and the program has managed to roll out to 11 provinces.

• The PNG Tax Review Committee has found that the PNG is more reliant on its personal and corporate income taxes. Chairman Sir Nagora Bogan said that the country needed to lower its personal income tax rates for all income earners. He added that the introduction of capital gains tax would relieve pressure on corporate and personal income tax.

• IPBC has handed over the Lae Tidal Basin project to PNG Ports Corporation Ltd (PNGPCL). IPBC MD Mr Wasantha Kumarasiri and PNGPCL CEO Mr Stanley Alphonse signed a memorandum of agreement to signify the handover of the multi-billion kina project this week.

• National Fisheries Authority deputy MD Mr Ludwig Kumoru estimated that the country loses about K1.7b annually when tuna caught in PNG waters were sold and processed overseas. He said approximately 550,000 metric tonnes of tuna worth K2.0b were being caught annually in PNG waters. However, the country was only making about K300.0m on exporting of raw tuna. More fish processing plants needed to be built in PNG for the country to actually reap benefits off the marine resource.

• Puma Energy has advised the Independent Consumer and Competition Commission (ICCC) that the Import Parity Prices (IPP) for April will increase for petrol and diesel while the price of kerosene will decrease this month at the IPP level. The retail fuel prices for April will see Petrol price increase by 6.6 toea per litre, diesel price will decrease by 0.3 toea per litre while kerosene price will decrease by 5.6 toea per litre.

• As was announced during its AGM that SP Brewery is poised to pay its yearly dividends in 2015 as anticipated (in 2 tranches) and plans to enhance its marketing campaign as well as start producing beer from cassava.

• Puma Energy has appointed Mr Hulala Tokome as general manager of its downstream business in PNG.

• Nautilus Minerals (NM) has signed a contract with Gardline CGG Pte to provide exploration services for its Solomon Islands operations The primary objective of this program is to discover further mineralised systems to support the NM’ business model.

• This week’s BPNG auctions in Treasury Bills were undersubscribed by K51.0m out of the K200.0m on offer. Weighted average yields remained flat at 4.7% for 182 days and 7.4% for 364 days from last week’s auctions.

• The KSi index and the KSi Home Index both closed the week flat at 3,555.0 and 9,772.1 from 9,750.9, respectively.

International Market Summary

• US stocks edged higher as energy companies gained amid a rebound in crude, offsetting quarterly results from Alcoa and Bed Bath & Beyond that disappointed investors. NASDAQ and S&P500 closed the week higher 1.8% and 1.2%, respectively.

• European shares rose to their highest in nearly eight years on the prospect of more corporate deals, as well as figures showing a strong recovery in Europe’s auto sector and robust German data. DAX surged to 12,166.44 points up 1.7% for the week.

• China’s inflation data for March produced small positive surprises, but remained tepid, with little sign that Beijing’s easing measures to date have significantly cut worrisome deflationary pressure. This saw Shanghai index climb 3.4% to 3,957.53 points this week.

• Japan’s Nikkei topped the psychological 20,000-point mark on Friday for the first time in 15 years on hopes of stronger corporate earnings and gained 2.4% on the week. The Nikkei rose as high as 20,006 before ending down 0.2% at 19,907.63 for the week (refer to graph in the PDF attachment below).

• In Australia, the banks joined the supermarket owners in driving an afternoon rally, while energy players enjoyed gains in the oil price. This saw the ASX200 closed at the day’s high at 5968.4, while the All-Ords added 34 points to 5935.4 – both up 0.6%. For the week, the benchmark index advanced 1.8%. The general sentiment for Australian equities has materially improved this week.

• Brent crude prices rose this week to US$56.71 up 3.2%, rebounding from a tumble in the previous session that was prompted by a surge in US crude inventories.

• PGK/USD ended 1.3% lower for the month to 0.3725, while PGK/AUD appreciated by 1.9% to close at 0.4850.

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

pdfKFM Weekly Investment Update: Friday, 10 April 2015

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