KFM Weekly Investment Update: Thursday, 24 March 2016

Local Market Summary:

• PNG’s financial institutions have over K44.0bn in banked assets according to the Bank of Papua New Guinea (BPNG). Majority of this is held by commercial banks, accounting for 70.0 % whilst super funds and other non-bank financial institutions hold the remainder

• Organizations will have to adapt to the change in the business environment or risk being left behind, according to KPMG-PNG’s Audit Partner Mr Zabaks, who commented that PNG was not immune to the effects of global market volatility; increased competition, regulation and budgetary constraints, created a challenging operating environment which required adjustment to “survive”

• KK Kingston CEO Mr Kingston stated that there are certain companies which have benefitted from the decline in global commodity prices explaining that local businesses; engaging local suppliers as economic alternatives

• Datec PNG, a subsidiary of Telikom PNG opened its retail shop last week in Mt Hagen, Western Highlands Province as part of its expansion plans. According to Telikom PNG CEO, the new infrastructure will help improve internet enabling the company to expand in Goroka and Madang

• Water PNG announced it has relocated to a new office at the Petromin Building in Port Moresby. CEO, Mr Taviri, said the move was an act of support to the firm’s growth and with the approval from the Board and acceptance by Petromin management the move was made possible

• BSP Finance released their Key Disclosure Statement for the year ended 31 December 2015, announcing a net loss of K2.4m after completing their first year (13 months) of operations

• Peoples Micro Bank turned profit in 2015 with a year-end Net Income of K1.4m. The positive result driven by a significant increase in interest income on the back of continued growth in Lending and Investments

• Finance Corporation Limited announced its Net Income after Tax of K20.0m, up K10.6m from the previous year. The growth in Profit underpinned by increased investment and lending income and a significant reduction in the non-interest expenses

• This week’s BPNG auctions in Central Banks Bills were only offered for 28 days with an oversubscription of K649.0m out of a total of K445.0m on offer. The weighted average yield was 1.16%. KFM expects short term rates to remain flat around current levels

• This week’s BPNG auctions in Treasury Bills were oversubscribed by K316.9m out of K268.6m on offer indicating strong appetite for the short term securities. Weighted average yields were 2.8% for 91 days, 4.8% for 182 days and 7.7% for 364 days from this week’s auctions

• The KSi Index ended the week up by 6.7% to close at 4,033.78 points, supported by an increase in share price of Newcrest Mining (+15.2%) while the KSi Home Index was down by 0.2%, reflecting decline in Credit Corporation (-0.6%), to end at 9,097.40 points (refer graph)

International Market Summary:

• US stocks declined as commodity shares followed crude prices lower, while investors awaited further clues on the economy and direction of monetary policy. The main US equity benchmark, S&P 500 dropped 0.2% as tumbling crude amplified concern that a slowdown in China would drag down global growth

• EU markets closed mixed for the week as investors digested a renewed decline in commodity stocks, and major indices attempted to recover after the terrorist attacks that took place in Belgium on Tuesday. Stocks were shaken up on Tuesday after Belgium was struck by a series of attacks in which at least 31 people were killed and many more injured. Global terrorist organization ISIS claimed responsibility for the supposed suicide bombings that took place in the capital city’s airport and a metro station

• China’s stocks fell for the week as the slowing economy and slumping commodity prices dragged down profits for some of the nation’s largest companies. Most market commentators indicated that Chinese corporate earnings, especially those of industrial companies, won’t pick up unless economic growth regains momentum

• Oil prices retreated for the week as concerns over a global supply glut continued to weigh on sentiment. The US Energy Information Administration announced in afternoon trade that US crude stocks rose by 9.4 barrels in the last week, reaching a total of 532.5 million barrels

• PGK/USD was down for the by 0.9% for the week ending at 0.3235 while PGK/AUD picked up by 1.1% to close at 0.4316 caused by a drop in AUD/USD, down 2.0% to close at 0.7496

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pdfKFM Weekly Investment Update: Thursday, 24 March 2016

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