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KFM Weekly Investment Update: Friday, 24 December 2015

Local Market Summary:

•Trade, Commerce and Industry Minister Richard Maru in a statement said that
the Government as part of their reformation of the financial sector intends to
bring in an independent owner of the Port Moresby Stock Exchange (POMSoX)
to encourage transparency, innovation and participation in the capital markets.
Minister Maru further stated that the state is in negotiations with international
fund managers to take up ownership of POMSoX.

•Bank of PNG Governor, Hon Loi Bakani said in a statement that 80% of the
country’s population have no access to financial services. The executive
director of the institute of National Affairs, Mr Paul Barker revealed this following
a survey conducted in the rural areas of Madang and Morobe Province
highlighting women in particular hence a special financial programme will be
developed to bring women into the formal financial system, says Mr Bakani

•The Chief Executive Officer, Women’s Micro Bank Limited (WMBL) Mrs
Thushari Hewapathirana stated that Hon Prime Minister Peter O’Neil pledged to
establish branches of WMBL nationwide as budgeted in the 2016 National
Budget. The management of WMBL intends to utilise the allocated funds to
increase the bank’s loan portfolio to provide basic financial services to women in
the remote areas

•Tokyo Electric Power Company (Tepco), a key client of PNG LNG, reported that
its LNG imports and LNG consumption dropped 9.4% and 10.6% respectively
over the last 12 months. Tepco is Japan’s first importer of LNG and it imports
the fuel from projects located in Brunei, the United Arab Emirates, Malaysia,
Indonesia, Australia, Qatar, Darwin, Oman, Russia and Papua New Guinea.
Restarts at Japan’s shuttered nuclear reactors will start to reduce the country’s
LNG consumption, in another bearish development for global gas markets

•Newcrest Mining saw a significant change in its operations in 2015 according to
CEO Sandeep Biswas. Mr Biswas said that the company’s Edge programme
was instrumental in the company’s performance this year, exceeding
expectations in delivering around US$390.0m (K1.14bn) in cash benefits which
helped bring in K2.3bn of free cash flow allowing them to reduce net debt by
K2.4bn

•Oil Search (OSH) stated that it has refinanced its two existing US$125m loans
provided by ANZ Bank and Commonwealth Bank of Australia to fund the equity
share of the development costs of OSH’s priority growth projects. This also
includes the US$500m non-amortising revolving credit facility, due to expire in
October 2017. OSH has a total undrawn corporate facility of US$750m

•Kina Bank Chief Executive Officer, Mr Syd Yates hailed 2015 as a landmark
year not only for the bank but also for the financial services sector in PNG. Mr
Yates said following the successful acquisition of Maybank and subsequently
becoming the fourth largest bank in PNG, Kina Bank is ideally positioned to
grow its market share through focusing on development of competitive new
products for retail and small business sectors

•This week’s BPNG auctions in Central Banks Bills were only offered for 28 days
and 63 days with an oversubscription of K500.0m out of total of K122.0m on
offer. The weighted average yield for 28 days was 1.32% while 63 days was
2.32%

•This week’s BPNG auctions in Treasury Bills were undersubscribed by K104.5m
out of total K300.0m on offer indicating weaker appetite for short term securities.
The weighted average yield for 28 days was 1.4%, 63 days was 2.4%, 91 days
was 2.6%, 182 days was 4.7% and 364 days was at 7.6%

•The KSi Index ended the week in positive territory, up 0.1% to close at 3,491.5
points while the KSi Home Index was up by 1.5%, supported by the share price
increase in banking stock Bank South Pacific (+2.0%) which more than offset
the fall in KAML (-10.5%)share price, to end at 9,592.91 points

International Market Summary:

•US equities extended a rally in this holiday week, as energy shares surged the
most in almost three months and consumer-spending data boosted optimism on
the US economy showing consumers’ willingness to spend buoyed optimism
toward the outlook for growth. Investors were loading up on some of the year’s
biggest losers in search of bargains among energy and raw-materials shares

•Asian shares were higher in early trade today, supported a recovery in crude oil
prices and gains on Wall street ahead of this week’s Christmas holiday. Japan’s
stock market was closed on Wednesday to celebrate the Emperor’s birthday

•European shares surged on Wednesday, boosted by gains in commodities
stocks on the back of stronger metals and crude oil prices and signs of more
economic stimulus measures in China, the world’s largest metals consumer

•OPEC has lowered its long term estimates for oil demand to US$70 a barrel by
2020 and US$95 a barrel by 2040 compared to last year’s estimates of US$95.4
and US$101.6 a barrel respectively. According to its World Oil Outlook released
this week, OPEC predicted that long term oil prices will remain below US$100 a
barrel but gradually recover as supply growth slows and the market rebalances.
Brent crude ended the week higher at US$37.64 a barrel after dropping to an
11-year low of US$35.98 a barrel

•PGK/USD remained unchanged for the week to end at 0.3345 while PGK/AUD
fell by 1.6% to close at 0.4616 caused by an increase in AUD/USD, up 1.6% to
close at 0.7246

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pdfKFM Weekly Investment Update: Friday, 24 December 2015

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