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KFM Weekly Investment Update: Friday, 20 February 2015

Local Market Summary

• More than 200 local companies have been engaged with the 2015 Pacific Games. They have shared in K51.0m already spent by the Games Organising Committee (GOC). GOC CEO Mr Peter Stewart added that many local businesses have benefitted from business opportunities and more can benefit from it right up to the games.

• Agriculture and Livestock Minister Hon Tommy Tomscoll said the palm oil industry brings in more than ~K1.2b into the country. He added that the Government wanted to see a fairer distribution of gains from the industry to stakeholders, particularly the village farmers.

• Barrick Gold Corp announced that it would sell one of its subsidiaries in PNG in an attempt to withstand challenges in the mining industry. The company said it will sell Barrick Niugini, under which it holds 95.0% interest in the Porgera JV to potential buyers. The sale would be done to consolidate its core assets in the Americas, with the major factors being the adverse movement in gold prices and pressure to reduce debt.

• The chairman of the Steamships board Mr Bill Rothery has retired after serving for 18 years. During his term as chairman, the board decided to have Steamship exit the retail sector to focus on property. His successor Mr Geoff Cundle will take over the role next month.

• Steamships announced the closure of its East West Transport Highlands Highway operations. The main factors behind the cease in operations were the completion of Exxon Mobil PNGLNG development stage, deteriorating condition of the highlands highway and security threats along the highway.

• Ramu NiCo has recently installed a new melting system at its refinery in Madang. The new melting system is expected to significantly improve the capacity of sulphur melting. The system would ensure the stability of the main refinery process so as to complete annual production targets in advance if all goes as planned the company said.

• Kina Asset Management (KAM) announced that the Net Tangible Asset per share of KAM was K1.01 as at 31/01/15 down 1 toea from 31/12/14.

• The CPI was 1.4% in December quarter 2014, compared to 1.6% in September quarter of 2014. The CPI headline index also showed an annual change of 6.6% over 12 months from December quarter 2013 to December quarter 2014.

• This week’s BPNG auctions in Treasury Bills were undersubscribed by K145.7m with a weighted average yield of 4.6% for 182 days and 7.4% for 364 days.

• BPNG this week advised market participants of Treasury Bill offering at the secondary market. A total face value K 1,745.2m was on offer from the 182 and 365 term bond.

• Furthermore, BPNG has sent GIS bidding invitations to registered bidders for K200m worth of bonds. The auction offers series: 2018, 2020, 2022, 2023 for K50m each at indicative yields of 9.5%, 10.8%, 11.3% and 11.7% respectively.

• The KSi index was down 0.2% to 3,594.52 for the week and KSi Home Index closed 1.4% lower for the week at 9,638.37.

International Market Summary

• Stocks in Asia rose, as fears eased over Greece leaving the Eurozone. Japan’s Nikkei extended gains from a 15 year high up 2.3% for the week to 18,332.30. Metal product makers and paper manufacturers led the advance in Japan (refer to graph in the PDF attachment below).

• US stocks slipped, but pared their early losses, as investors focused on negotiations over Greece’s bailout. Mario Draghi’s embrace of Federal Reserve style stimulus gave US equities their first weekly gain this year. The S&P500 climbed 0.4% to 2,097.45 during a holiday-shortened week.

• Negotiations over further financial aid to Greece continued to drive European markets, but stocks edged to a fresh seven-year high with investors continuing to bet the country can reach a deal with its creditors. The FTSE and DAX closed higher up 0.2% and 0.4% at 6,888.90 and 11,0001.94 respectively.

• The US10 year bond closed the week at 2.1% while the AU10 year bond gained 0.1% to close the week 2.6%.

• Energy producers in the S&P 500 have surged 11.0% since Jan 2015, as US crude climbed above US$50 a barrel, bolstered by speculation that a decline in drilling will slow output and curb a global supply glut.

• Gold prices advanced as traders’ hopes that the Federal Reserve would delay raising interest rates outweighed pressure from a potential debt deal for Greece.

• PNG/USD closed 1.5% lower at 0.3747 while PGK/AUD further depreciated by 1.9% to 0.4801 for the week.

Click on the link below to view full report in PDF.

pdfKFM Weekly Investment Update: Friday, 20 February 2015

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