KFM Weekly Investment Update: Friday, 17June 2016

Local Market Summary

• PNG is set to embark on international road shows next week for what it hopes will be its debut international bond deal. The B2/B+ rated nation has hired ANZ, Bank of China, JP Morgan and Societe Generale for a dollar-denominated transaction

• Asian Development Bank’s Outlook has revealed that PNG’s inflation is expected to reach 6.0% in 2016 and 2017. This inflation is reflective of PNG government’s efforts to sustain public spending and expectation of kina depreciation

• Newcrest Mining said that the recent hike in gold prices have less impact in improving the foreign exchange issue which the economy is facing. There are a range of factors influencing the foreign exchange liquidity therefore the recent increase in the gold price is likely to have less impact. In addition there has been a significant increase in crude oil prices which could benefit PNG revenues. Department of Treasury is keeping a close watch in these trends to respond to the 2016 Government Budget

• Effective 1 July 2016, the minimum wage in Papua New Guinea will rise to K3.50 an hour from the current rate K3.36 an hour. The rise follows a recommendation by the Minimum Wages Board to the National Executive Council in June, 2014, for the minimum wage to rise by 40 per cent in three stages. The first rise was in June 2014, from K2.29 to K3.20 an hour. The second stage was implemented a year later, taking the minimum wage to K3.36 an hour

• A Japanese company is interested in investing in the fishery industry, particular the exporting of sashimi (raw fish) directly to Tokyo. Setouchi Holdings PNG project office chief Akira Kazusa held talks with International Food Corporation in Lae to discuss the potential of a partnership in the fishing industry, along with PNG Ambassador to Japan Gabriel Dusava and officials from National Fisheries Authority

• The National Capital District Commission (NCDC) has issued a tender notice to seek expression of interest from suitably qualified consultant firms or individuals to review the existing NCDC Urban Development Plan (2005 -2015). The urban development plan will include whole area of National Capital District (NCD) and land outside the gazetted boundary of NCD which is considered to be within the immediate sphere of influence of NCD as per the Physical Planning Act 1989

• InterOil shareholders have overwhelmingly voted to re-elect all eight of its director nominees, and rejected all resolutions proposed by the company’s founder Mr Phil Mulacek and certain of his associates, at InterOil’s Annual and Special Meeting of Shareholders held on June 13 June 2016. Each of the other proposals presented at the meeting were approved by shareholders, including the appointment of auditors, approval of a new incentive plan and the denial of Mr Mulacek’s expense reimbursement

• Oil Search Managing Director Mr Peter Botten said the long-term market outlook for gas remains strong. Mr Botten, in the Oil Search June update, said that the expansion of the PNG LNG and the Papua LNG projects were expected to start early in the next decade and should coincide with an increase in demand and a shortage of supply. He added that the PNG LNG and Papua LNG were making progress while less competitive projects had been delayed or cancelled

• Kina Asset Management Limited announced an NTA of K1.12 as at the 31 May 2016 down by 1toea from the previous month

• This week’s BPNG auctions in Central Banks Bills were only offered for 28day maturity with an under-subscription of K357.0m out of a total of K359.0m on offer. The weighted average yield was 1.1%

• Auctions in Treasury Bills were under-subscribed by K238.9m from a total offer amount of K241.3m. Weighted average yields were 2.7% for 91 days, 4.7% for 182 days and 7.7% for 364 days

• The KSi closed 4.3% higher at 4,678.06 points on the back of a 7.1% gain in NCM and a 2.4% gain in OSH share price while the KSHi remained unchanged for the

International Market Summary

• US stocks fell this week, with the US Federal Reserve having lowered its economic growth forecast and signalling it still planned two rate increases this year, even though the Fed put off an immediate rate hike

• Meanwhile, European shares also fell this week, with banking stocks dragging regional equity indexes to touch their lowest point in almost four months in a market dominated by concerns over next week’s British vote on European Union membership

• Global oil majors Chevron Corp and Royal Dutch Shell Plc are putting small refineries on the auction block as they look to trim lower-margin assets in the face of headwinds from rising crude oil prices

• Japan’s Nikkei share average rebounded this morning and recovered from fourmonth lows after the yen took a breather from its recent strong gains, lifting all sectors into positive territory

• China is looking into possible risks to its foreign exchange reserves as outbound investment has eclipsed foreign investment inflows

• PGK/USD closed the week up 0.4% at 0.3172, PGK/AUD also gained 0.4% to close at 0.4302 while the AUD/USD remained unchanged at 0.7375

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pdfKFM Weekly Investment Update: Friday, 17 June 2016

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