KFM Weekly Investment Update: Friday, 15 January 2016

Local Market Summary:

• Prime Minister, Hon. Peter O’Neil said in a news conference that the Government will take an assertive approach in tax collections from businesses emphasising that the PNG economy was ‘tight’ on cash flow in light of the decline in commodity prices

• Trevor Meauri, deputy secretary for policy with the Department of Prime Minister said the National Government is expected to save K100.0m on rental expenses for its departments and other state organisations by the end of this year when revamped Marea Haus (Pineapple Building) and Central Government offices are open for use. The government spends more than K200.0m in rentals for its departments and other state organisations to operate in the country

• High Commissioner to Malaysia Mr Jilid Kuminding is pleased with the growth of trade with PNG. He said Malaysia’s total trade with PNG increased by 15.6 % between January and November from the corresponding period the previous year

• Nambawan Super Ltd CEO, Garry Tunstall said that the State has not reimbursed a total of K135.0m which NSL paid to exiting members over the twelve months leading up to December 2015. Mr Tunstall said that the State has not reimbursed the fund since November 2014 adding that another K6.7m remains outstanding for members who exited the superfund in the last month

• The Manufacturing Council of PNG is supporting Hon. Richard Maru’s decision that PNG is not ready to sign the PACER agreement negotiated between the 14 forum islands countries including Australia and New Zealand which are based on removing tariffs and provides a framework for the future development of trade. As the removal of the remaining tariffs will cause problems to PNG industries hence, the Australian and New Zealand products would be cheaper than PNG produces

• A report released by IMF stated that the USD/PGK rate is market-determined and not a BPNG directive. It stated that import payments were not unduly delayed as reflected in the absence of importer bankruptcies. In addition, excessive liquidity inhabits the monetary transmission mechanism as a result inflationary pressure remained confined despite these and tight monetary and fiscal policies were precondition for the proper functioning of any foreign exchange market

• The Opening of Hotel Kokopo early this week, as well as the opening of the No 1 Lodge a few weeks ago brings the total commercial accommodation providers to 47 in East New Britain Province. This has given the tourism industry in ENB a major boost

• Kina Asset Management Ltd announced an NTA of K1.09 for the month ending 31 December 2015

• This week’s BPNG auctions in Central Banks Bills were only offered for 28 days with an under subscription of K178.0m out of total of K751.0m on offer. The weighted average yield was at 1.24%

• This week’s BPNG auctions in Treasury Bills were undersubscribed by K142.6m out of a total K340.0m on offer indicating reduced appetite for short term securities. The weighted average yield for 63 days was 2.5%, 91 days was 2.6%, 182 days was 4.7% and 364 days was at 7.6%

• The KSi Index ended the week down by 3.8%, to end at 3,375.52 points while the KSi Home Index decreased by 0.7% at 9,433.01

International Market Summary:

• The S&P 500 rose 1.7% to close Thursday in the green, led by Healthcare and Energy Stocks following ‘dovish’ comments from the US Federal Reserve.

• Asian markets dropped to their lowest in over 4 years as doubts rose about Beijing’s ability to manage the world’s second biggest economy. With Tokyo on holiday for a day only made liquidity worsened heightening volatility. Chinese main indexes slumped more than 3.0% at one point

• Oil prices took a dive earlier this week settling just above U$30.0 a barrel, as the market priced-in further indication of increased supply into the market led by Iran’s return to the market following the lifting of western sanctions on the country’s crude oil exports. Brent and Crude oil prices ending the week down 8.0% and 9.0% respectively

• Gold prices rose sharply this week off the back of continued uncertainty led by a decline in oil prices fuelling increased uncertainty in the global markets (refer chart)

• PGK/USD ended the week lower by 0.3% at 0.3315 reflecting the continued shortfall in liquidity experienced throughout the year. PGK/AUD ended lower as well by 0.2 to 0.4771

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pdfKFM Weekly Investment Update: Friday, 15 January 2016

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