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KFM Weekly Investment Update: Friday, 13 October 2017

Local Market Summary

• Treasurer Charles Abel confirmed that government salaries will be audited in line with its 100-day plan to restore discipline and contain costs. This exercise would involve placing a hold on recruitment of public servants; identifying departments and agencies that could be merged and strengthening the government’s payroll management system

• Japan International Co-operation Agency (JICA) has committed K9.1m to renovate and upgrade the Nadzab airport in Lae to become the second international airport in the country. According to JICA and National Airports Corporation (NAC) the construction consists of widening the run way, new concrete apron and existing pavement facelift for taxiways and apron. Lae Chamber of Commerce president Mr Allan McLay said the upgraded airport will also provide an alternative landing strip to Jackson’s airport in an emergency and is an opportunity for the business communities of both cities to work together

• The British Oxygen Company managing director John Evans said that the company invested more than K135.0m as it has confidence in the business environment in the PNG. Mr Evans also said that it was the leading gas and engineering company in PNG supplying compressed and bulk gases, chemicals and equipment to customers. The company is confident in its investments for continuous growth into the future

• The Nabak-Kawa Land and Resources Owners Association in Lae has recently launched a programme to partner with the government in a public–private– landowner partnership. The programme will assist approximately 150 members of the association engage in income generating activities which include coffee growing, vegetable, poultry, fishing and livestock farming

• Melanesians Trustees Services (MTSL) chief executive officer (CEO) Kennedy Wemin said that the downgrade in the country’s credit rating and ongoing foreign exchange shortage has negatively impacted the performance of MTSL’s investments. Despite the downturn, MTSL will be distributing more than K2.5m to Pacific Balance Fund unit holders which is in line with its mandate to distribute the returns from the investments to its unit holders.

• This week’s BPNG auctions in Central Bank Bills were offered for 28 and 63 days with an over-subscription of K107.0m out of total amount of K677.0m on offer, indicating an increase in appetite for short term securities. The weighted average yield for 28 and 63 days remained unchanged at 1.37% and 2.35% respectively from the previous week

• This week’s BPNG auctions in Treasury Bills were under-subscribed by K12.7m out of a total amount of K268.4m on offer. Weighted average yields for 91 and 182 days remained unchanged at 2.48% and 4.73% respectively, while the 273 day increased by 0.01% to 6.74%. Meanwhile, the 364 day weighted average yield decreased by 0.01% to 8.00%.

• The KSi Index ended the week with a gain of 0.3% to close at 5,270.25 lifted by the rise in share prices of BSP and Oil Search to end at K9.45 and K17.66 respectively. The KSi Home Index gain by 0.5% to close at 10,987.44 points

International Market Summary

• Earnings season begins in the US with JP Morgan and Citigroup Inc. leading with positive third quarter results thus providing a boost for the S&P 500 index which was up 0.10% for the week at 2,550.93. Data in the US showed that wholesale fuel prices increased causing the USD to strengthen for the week while Treasury bond yields slipped. The US 10-year bond yield dropped 0.04% to 2.32%

• Blackrock CEO, Larry Fink said in an interview that the US stock market deserves a premium compared to other markets. This was during a discussion on asset allocation on a global perspective. He went on to add that the US market will continue to rally if they see that earnings results justify current high valuations. This was during an interview after Blackrock reported better than expected results in earnings for the third quarter

• The Chinese economy is still expanding at a stable pace despite concerns in the market that this might not have been the case. According to trade data released for the month of September, China’s import and export growth accelerated in the last month suggesting further improvement for the economy

• Asian stocks also saw a positive week supported by positive trade data from China indicating growth in exports and imports, beating expectations and proving that China’s economy is holding up.

• Oil prices welcomed another week of improvement with Brent Crude moving up 1.7% and Light Crude up 3.4% for the week supported by strong Chinese oil import data. The global oil markets look to be balancing out with the OPEC-led move to cut production being extended

• PGK/USD remained unchanged for the week to close at 0.3125 while PGK/AUD depreciated by 0.9% to end at 0.3991

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

pdfKFM Weekly Investment Update: Friday, 13 October 2017

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