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KFM Weekly Investment Update: Friday, 21 July 2017

Local Market Summary:

•Earlier this month, the Coffee Industry Corporation (CIC) gave an update regarding the threat of the coffee borer beetle (CBB) in the Highlands region. The National Agriculture Quarantine & Inspection Authority (NAQIA) also voiced concerns that delay in government funding toward efforts to contain the CBB infestation would put the coffee industry further under threat. The CIC is now getting assistance from the Productive Partnership in Agriculture Project (PPAP) with K1.0m to help fund the fight against the CBB spreading. According to PPAP Project manager, Potaisa Hombunaka, the funds will be used to buy proper tools and equipment such as CBB traps. He also expressed disappointment in the government’s failure to provide K20.0m to CIC to fund this project which is why PPAP has stepped in to assist

•According to Business Advantage PNG, the Bougainville’s Panguna copper mine is gaining momentum to reopen. The Autonomous Bougainville Government President John Momis stated that Bougainville Copper Mine (BCL) is focused to open an office next year to deal with outstanding issues that were ignored by former miner, Rio Tinto. However, he stressed that costs involved in reopening the mine presents a great challenge in which BCL estimated to be US$5.0b. He added that if BCL fails to secure funds, the ABG will invite other companies to apply and get processed

•Nautilus Minerals stated that it is progressing well with its plans to develop the sea mine in PNG. The company said it is trailing sea floor production tools at Motukea Island outside Port Moresby and informed shareholders that the construction of production support vessel is near completion

•Oil Search (OSH) announced firm production performance of 7.24m barrels of oil equivalent (mmboe) in its second quarter report. CEO Peter Botten stated that although the results was 4% lower than previous years, total production for the first half of 2017 was 14.81mmbe generating total revenue for the period to US$332.5m (K1.0b). He added that the key aspects were strong customer interest for additional LNG volumes that is marketed by ExxonMobil

•Chairman of City Pharmacy (CPL) Mahesh Patel announced that the business has returned to normal operations as usual after the destruction of its warehouse by fire. He stated that the only challenge is to get stocks on time to meet customers demand and also stressed that the firm needs time to fully roll things forward

•In the meantime, Mr. Patel said that CPL is working towards establishing relationship with global manufacturers to supply PNG with quality products. He said the firm’s strategy is focused on basic necessity such as food, health and shelter and expressed that only the products that match PNG will be brought in

•The LNG joint venture partners ExxonMobil and Total SA discussed models of developing Elk Antelope and P’nyang gas fields that will be presented to the new PNG government. Oil Search MD Peter Botten while revealing this stated that the development included the construction of two new LNG trains that aimed at utilizing downstream infrastructure

•This week’s BPNG auctions in Central Bank Bills were offered for 28 days with an over-subscription of K23.0m of the total amount of K553.5m offered, an increase in appetite for shorter dated securities compared to last week. The weighted average yield was 1.34%

•This week’s BPNG auctions in Treasury Bills were under-subscribed by K16.1m out of a total amount of K160.2m on offer demonstrating consecutive decline in appetite for longer dated securities. Weighted average yields for terms 182, 273 and 364 days were 4.74%,6.68% and 7.96% respectively

•The KSi Index and KSi Home Index both increased from the previous week at 0.05% and 0.2% to end at 4,992.03 and 11,156.28 points reflecting positive share price movement of CCP and KSL

International Market Summary:

•US stocks closed with mixed results with the Dow Jones Industrial index down 0.1% while the S&P 500 and NASDAQ were up 0.6% and 1.2% respectively for the week indicating renewed uncertainty regarding the Trump administration’s ability to support positive economic growth with their policies

•Chinese companies and investors who have been pursuing US assets could be facing challenges with the Chinese government restricting flow of capital out of China following a large number of Chinese acquisitions of US companies this year. The Committee on Foreign Investment in US (CFIUS) have ‘blocked’ 9 Chinese firms this year based on ‘measures proposed to address potential national security risks,’ they said. This indicates the CFIUS is becoming more risk-averse under the Trump administration

•The European Central Bank (ECB) has left its policy stance unchanged according to ECB President, Mario Dragi who indicated that they may look to discuss potential changes to their quantitative easing program in the months to come. The ECB announcement prompted a rally in bonds and currencies

•PGK/USD remained unchanged to close at 0.3145, PGK/AUD depreciated by 1.0% to end at 0.3975 while AUD/USD appreciated by 1.0% to end the week at 0.7914

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

pdfKFM Weekly Investment Update: Friday, 21st July 2017

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