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KFM Weekly Investment Update: Friday, 14 June 2017

Local Market Summary:

•Planning Secretary to the Department of Monitoring and Planning Ms Hakaua Harry announced that instructions were issued to all heads of departments, statutory bodies and provincial administrators to ensure they submit their reports on the status of projects funded under the Public Investment Project in preparation for the 2017 mid-term development budget review by mid-July. Which will allow time for the department to plan, manage resource allocation and project implementation during the year

•Furthermore, the 2017 budget is the fifth and final for the current government theme “Responsible Fiscal Consolidation for Future Growth and Development”. The budget is aimed to lay the foundation for inclusive sustainable growth focused at establishing an investment platform with a least a five-year outlook to support major development programs required to support the country’s growing future. The appropriation of the 2017 development budget was K4.0b which is a reduction of K1.0b from the 2016 national budget because of the need to maintain the 2017 budget deficit at 2.5%

•According to the chairman for Rural Industries Sir Brown Bai, the country’s Livestock Development Corporation is non-operative in which imports of the country remain very high resulting in the local industry being dormant with more demands. Sir Brown stressed to recommend to the up-coming government to rebuild the organisation structure and involve more livestock activities

•National Superannuation Fund (NasFund) and Mineral Resources Company (MRDC) owns shareholdings of 40.0% each in PNG Air. Thus contributors to NasFund and shareholders of MRDC will gain from returns earned by PNG Air. The stakes were bought when the airline, formerly operating as Airlines PNG had undertaken a recapitalisation exercise of which the two collectively had injected K20.0m in the airline company

•High Artic Energy Services (High Artic) the largest operating company in PNG which provides mineral resources drilling and specialises in rig matting and drill support equipment negotiated a US$100.0m joint venture with its major customer Oil Search (OSH). Chairman for High Artic Mr Michael Binnion said the name of the joint venture will be released once negotiations are complete. This joint negotiation is to exchange an equal share of its owned rigs (rigs 102,115 and 116) for an equal share of rigs historically managed by OSH (rigs 102,115 and 116) subject to long-term management agreements

•Additionally, High Artic will manage this joint company and will operate the rigs under a minimum three-year exclusive call rig service arrangement. Under this arrangement, the joint company, OSH will focus on rig ownership while High Artic will focus on operational efficiencies and optimal rig performance. International President to High Artic Mr Mike Maguire said that this joint venture with OSH is an innovative solution in reducing OSH costs and providing a cost efficient drilling solution in PNG

•Bank South Pacific (BSP) through its first-home ownership scheme is now offering young employees the option to buy homes using their superannuation. CEO to BSP Mr Robin Fleming said this was a positive change compared to the past where mostly older workers were eligible to get a housing loan. There will be a 10.0% equity requirement for this scheme unlike before which was 20.0% and is the normal requirement for standard housing loans offered by banks

•This week’s BPNG auctions in Central Bank Bills were offered for 28 & 63 days with an under-subscription of K12.0m of the total amount of K298.0m offered indicating a decrease in appetite for shorter dated securities. The weighted average yields were 1.32% and 2.33% respectively

•This week’s BPNG auctions in Treasury Bills were under-subscribed by K5.1m out of a total amount of K228.0m on offer signifying a slight decline in appetite for longer dated securities. Weighted average yields for terms 91,182, 273 and 364 days were 2.45%,4.74%, 6.67% and 7.95% respectively

•The KSi Index and KSi Home Index both increased from the previous week by 3.4% to end at 4,989.70 points and 0.2% to end at 11,136.29 respectively reflecting the rise in share prices of BSP and NCM

International Market Summary:

•The Australian share market closed higher for the week and displayed their top weekly performance for the month as financials tracked Wall Street equivalents higher ahead of big US banking earnings. The S&P 200 rose by 1.1% to end at 5,765.10 points

•US stock closed higher on Thursday as retailers led by Target. The DJIA, S&P 500 & NASDAQ all closed higher by 0.6%, 0.9% and 2.0% to end at 21,553.09 points, 2,447.83 points and 6,274.44 points respectively

•European stocks closed higher on Thursday afternoon as investors digested new earnings reports and responded to more comments from US Federal Reserve. DAX closed higher by 2.0% to end at 12,641.33

•PGK/USD remained unchanged to close at 0.3145, PGK/AUD depreciated by 1.9% to end at 0.4061 while AUD/USD appreciated by 2.0% to end the week at 0.7746

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

pdfKFM Weekly Investment Update: Friday, 14th June 2017

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