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KFM Weekly Investment Update: Friday, 20 April 2018

Local Market Summary:

● PNG Minister for Communications, IT and Energy, Mr Sam Basil revealed that an Australian-funded undersea cable project is progressing to run a high-speed fibre-optic cable from Australia to PNG linking up with Solomon Islands which would bring huge improvement to internet service and reduce costs for endusers. According to the minister, the Coral Sea Cable will enhance business engagement, education and health services and hence urges all government agencies to support the project to ensure completion for the benefit of PNG people.

● Chief Executive of Abt Associates Australia, Jane Thomason, in an interview with Asia Times said that BPNG is currently testing a net-free solar digital device that could provide block-chain-based financial services to citizens currently without a bank account. According to Abt Associates, even though around 50% of PNG population have access to mobile phones, a majority lack access to banking and blockchain is a possible solution to people who are unable to access financial services.

● According to Security Commission Chairman, Mr Christopher Hnanguie, POMsoX guidelines will be reviewed by the Government to warrant more investors. Present major shareholders namely Kina Securities and BSP Capital each own 48% of the company. He further stated that the commission aims to expose capital market to the public as capital markets were drivers of the main Asian economies which he believes PNG could benefit from.

● Papua New Guinea is believed to be on track to sign up to a Free Trade Agreement (FTA) with China after Foreign Ministers from both nations met in Beijing.  PNG Foreign Minister, Rimbink Pato met with China Foreign Minister Wang Yi to discuss possibility of an FTA between the two nations in this year’s Asia Pacific Economic Corporation (APEC) summit which will be hosted in PNG. According to Mr Wang, Beijing is ready to enhance bilateral coordination with PNG under APEC framework and that both sides should promote this initiative as the countries move into a new era.

● Oil Search (OSH) released its 2018 first quarter report announcing a total production of 4.84m barrels of oil equivalent, 36% lower than previous quarter due to the shutdown of operations following the recent earthquake.  The report stated sales revenue totalling US$283.9m with capital expenditure of US$415.2m during the quarter.

● Furthermore, OSH MD Peter Botten announced OSH appointment of two new directors to the board after an intensive search. They are Susan Cunningham and Dr Bakheet Al Katheeri. Ms Cunningham and Dr Al Katheeri each have 35 and 20 years of oil and gas industry experience. Dr Al Katheeri is also the current chief executive officer of Mubadala Petroleum.

● Santos Ltd, oil and gas producer and foundation partner holding a 13.5% stake in PNG LNG, has reduced its full-year production forecast and reported a drop of 7.0% in production for the first quarter this year after being hit by 7.5 magnitude quake in February. The quake forced PNG LNG operator, ExxonMobil to shut down operations temporarily. Despite the drop in production, revenue was higher than previous corresponding quarter due to favourable commodity prices.

● This week’s BPNG overall auction results in Central Bank Bills were undersubscribed by K54.5m of the total amount offered K489.4m. The weighted average yield was unchanged for the 28 days term at 1.40% while the 63 days term was at 2.34%

● This week’s BPNG overall auction results in Treasury Bills were oversubscribed by K78.64m of the total amount offered K139.93m. The weighted average yields remained unchanged for 182 days, 273 days and 364 days were 4.72%, 6.76% and 8.04% respectively

● This month’s BPNG overall auction results for Government Inscribe Stocks were undersubscribed by a total of K76.0m for each term to maturity ranging from three to ten years. The weighted average yields for the respective series were; S15022021 at 9.46%; S15052022 at 10.52%; S15052025 at 11.52% and S15082028 at 12.75%.

● The KSi Index remained unchanged at 5,144.62 points for the week while the KSi Home Index ended the week up 0.6% at 11,041.23

International Market Summary:

● Asian stocks saw mixed results for the week after major chipmaker, Taiwan Semiconductor Manufacturing cut its revenue forecasts citing declining demand for smartphones. This has led to major tech stocks slipping for the week led by Apple whose smartphone products, iPhones are one of those most affected by downturn in demand. Shanghai Composite was down 2.6% and Hang Seng was down 0.9% while Nikkei was up 1.8% for the week.

● US stocks had a good week despite China threatening to retaliate if US insist on trade war. Dow Jones  was up 1.3%, S&P 500 was up 1.4% and NASDAQ was up 1.8%

● PGK/USD remained unchanged for another week at 0.3075 while PGK/AUD appreciated by 1.0% to end at 0.3987. This was driven mainly by the crosscurrency effect of the USD strengthening against major currencies

pdf KFM Weekly Investment Update: Friday, 20 of April 2018

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