KFM Weekly Investment Update: Friday, 15 April 2016

Local Market Summary:

•A new World Bank report quantified that Papua New Guinea is among small
economies in the East Asia-Pacific which continue to be affected by low
commodity prices. Growth in developing East Asia and the Pacific remained
resilient and is expected to ease only modestly between 2016 and 2018.

•The report further stressed that across the region, there is a growing need for
prudent fiscal policy to guard against future external shocks. This is especially
important in those economies where growth has been sustained through
increased public or private sector borrowing, or where external demand has
been supported by the commodities boom

•Nambawan Super Limited’s (NSL) Chief Executive Officer Mr Garry Tunstall
stated that the members expect a satisfactory answer on the status of their
debt with the Government in the coming weeks. This follows an understanding
reached with the Department of Treasury on how the Government could go
about repaying the K2 billion it owed to NSL.

•He further stressed that November 2014, the Government had not reimbursed
the Fund and the current outstanding balanced is more than K133m. The
board and the management of NSL had become concerned about the
financial exposure of, and legal implications to the fund and its members.

•National Superannuation Fund Chief Executive Officer, Mr Ian Tarutia
responded to concerns raised by members regarding the slow response to
their applications, mostly on withdrawal claims. He said the slow processing of
applications was not deliberately caused by staff but by a change in the
system through its administrator Aon Hewitt. He has assured members that
their savings are safe and they are doing everything they can to resolve
outstanding issues.

•The Government, through Kumul Consolidated Holdings Limited, is seeking
additional funds for the second phase of Pacific Marine Industrial Zone project
in Madang has the US$95 million (K296 million) loan from China’s EXIM Bank
will be used to fund only the first component of the project

•Total SA Chief Executive Officer Mr Patrick Pouyanné, said the company
remains prepared to invest in new projects despite the slump in energy prices
and weaker demand growth. Like others in the industry, the company has
been working to slash costs.

•Mainland Holdings Limited has paid out K7.2m in dividend to its shareholders
for the financial year 2015. The first dividend payment of K2.4m was paid last
October 2015 and the balance of K4.8m was paid this week in Lae. Large
stake of the dividend went to NASFUND while the rest was paid out to
shareholders in Morobe.

•The Simberi Gold Mine operator St Barbara stated that the mine has
produced 110,488 ounces gold over the 12 months exceeding a target of
100,000 per annum. In its March quarter production, the company stated that
mineral grade for the quarter averaged 1.35 grams per tonne of gold (1.35 g/t
Au), consistent with the ore reserve grade of 1.3 g/t Au.

•This week’s BPNG auctions in Central Banks Bills were only offered for 28
days with an oversubscription of K31.7m out of a total of K334.9m on offer.
The weighted average yield was 1.11%. KFM expects short term rates to
remain flat around current levels

•This week’s BPNG auctions in Treasury Bills were undersubscribed by
K13.18m out of K281.44m on offer indicating weak appetite for the short term
securities. Weighted average yields were 2.8% for 91 days, 4.75% for 182
days and 7.69% for 364 days

•The KSi Home Index ended the week flat at 9,187.20 points, while the KSi
Index was up by 1.7% to close at 4,0105.02 points, underpinned by an
increase in share price for Oil Search Limited (+4.9%)

International Market Summary:

•US equities gained for the week led by energy and financial shares as worries
about the global oil glut have eased, driving up prices of crude and boosting
shares of energy companies, which have been one of the market’s trouble
spots. Whilst, the European Central Bank’s announcement this week of further
stimulus and support for banks also calmed investors as financial shares

•China’s economy stabilized last quarter and gathered pace in March as a
surge in new credit spurred a property sector rebound while raising fresh
questions over the sustainability of the debt-fuelled expansion. Chinese GDP
rose 6.7% in the first quarter in line with the government’s growth target of
6.5% to 7.0% for the full year

•Oil rose above US$43 a barrel to its highest level so far in 2016 this week,
supported by hopes that a meeting of oil producers will agree on steps to
tackle a supply glut, and by a weak United States dollar and further signs of
strong demand in China. Many members of OPEC plus outside producers
such as Russia are meeting in Doha, Qatar, this week to discuss freezing
output. (Refer graph)

•PGK/USD was down by 0.03% for the week ending at 0.3195 whilst
PGK/AUD down 2.5% to close at 0.4137 as the AUD weakened against the
USD following the Fed’s decision to maintain rates, employing a cautious
approach to monetary policy

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

pdfKFM Weekly Investment Update: Friday, 08 April 2016

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