KFM Weekly Investment Update: Friday, 14 November 2014

Local Market Summary

• According to the Treasurer Hon Patrick Pruaitch, the soon to be released, PNG 2015 National Budget will demonstrate that the PNG economy is in good shape. According to him the economy is presently enjoying its best growth in the last three years despite falling commodity prices. GDP was 8.4% for this year.

• The CPI for the September quarter was 1.6% compared to 1.5% in June quarter of 2014. The CPI headline index also shows an annual change of 5.3% over 12 months from September quarter 2013 to September quarter 2014.

• The Independent Consumer and Competition Commission stressed that the price of fuel has substantially declined for November 2014. This decline was noticed across petrol, diesel and kerosene that decreased by 16.0t, 18.3t and 16.8t.

• Prime Minister Hon Peter O’Neil highlighted a range of concerns central to strengthening PNG’s economy in the recent APEC regional meeting held in China. He stressed that PNG is the gateway between Asia and the Pacific Islands.

• Nautilus Mineral, operator of Solwara 1 project, reported a loss of K14.5m or US$4.6m for the third quarter this year compared to same period last year due to impairment charges, exploration cost and currency movement.

• During a recent meeting held by Water PNG Limited in Lae it was revealed that the company will continue to provide quality and safe water supply and sewerage storage systems throughout its branches. The company is working jointly with Hunter Water Limited on a major development strategy to provide quality and affordable water systems to customers.

• Airlines PNG is scheduled to hold a special meeting on 18/12/14 in Port Moresby to approve its plans for capital restructuring which involve the buy-back and share option issues to NASFUND and MRDC.

• KAML announced an NTA of K1.04 as of 31/10/14, up by 6t from the previous month. Earlier in the week, KAML also announced investment loss of K1.1m or 2.2% in the September quarter due to volatility in the global markets and the Bank of PNG foreign exchange pegging. These losses have been fully recovered as at the date of this report.

• Monian the largest shareholder in Kina Asset Management Limited (KAML) made an offer to increase its current shareholding of 19.9% to 25.0%. The offer will be decided in the special general meeting to be held at the end of November 2014.

• This week’s BPNG auctions in Treasury Bills was under subscribed by K30.0m for 182 days with a weighted average yield of 4.5% and K39.0m for 364 days with a weighted average yield of 7.4%.

• The KSi index declined by 2.1% to 3,714.7 similarly KSi Home Index dropped 4.2% to end the week at 9,459.4.

International Market Summary

• Euro-area gross domestic product and inflation is due today, while the US reports on retail sales. Gold fell and oil is languishing in a bear market amid signs OPEC is unwilling to cut prices to ease a glut in supply. Light crude oil closed the week lower by 5.6% at US$74.2 while Brent crude closed by 6.7% at US$77.8 for the week.

• Data may show Japan’s economy returned to growth, amid reports Prime Minister Abe is preparing to call an election and postpone an increase to the sales tax.

• US stocks were little changed near record highs, as better-than-estimated results from Wal-Mart and corporate deals overshadowed losses in small caps and energy shares. The S&P 500 closed the week by 0.4% at 2,039.4.

• China’s slowdown deepened in October, as factory output rose 7.7% from a year earlier, the second-weakest pace since 2009. Despite that, by the week’s end, most Asian stocks rose for a sixth day as Japanese shares extended a six-year high in Tokyo after the Dow Jones Industrial Average climbed to a record.

• As Brisbane hosts its G-20 summit, the Australian dollar has bounced back from its tumble after the Reserve Bank said it hasn’t ruled out intervention to bring the currency lower. As of Friday, the local currency was trading at US¢87.2. Australian share market is marginally higher on Friday – S&P/ASX200 index was up 8.7 points, or 0.2%, at 5,451.4.

• To end the week the PNG Kina depreciated against the US$ by 0.3% from 0.3949 to 0.3939 and AU$ by 0.6% from 0.4617 to 0.4538.

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pdfKFM Weekly Investment Update: Friday, 14 November 2014

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