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KFM Weekly Investment Update: Friday, 21 November 2014

Local Market Summary

• PNG releases its 2015 National Budget:

  • The Minister for Treasury, Hon. Patrick Pruaitch handed down a whopping National Budget of K16.2b. The budget allocates a substantial amount of resources to Medium Term Development Plan enablers which are Provincial administration; Infrastructure; Health; Education; Law and order; Economic and the Social sector.
  • The budget deficit of 4.4% of GDP is lower than the 5.9% deficit in 2014. aims to continue support in economic growth by focusing on high impact priority infrastructures at national, provincial and district levels.
  • According to Mr Pruaitch, the economy is expected to grow by 8.4% in 2014 and increase to 15.5% in 2015 supported by the first full year of LNG production with inflation is forecasted to be 5.9% in 2014 and 5.5% in 2015.

• The government’s projected revenue of K13.9b by 2015 is expected to improve from mining and taxation. Acting Secretary for treasury Mr Vele said that PNG will capitalise from these revenues including LNG distributions collected from National Petroleum Company PNG.

• PNG’s international trade current account balance has been in deficit over the last six years but is projected to improve to a surplus of K7.1b by 2015, which will be largely driven by full year production from LNG project and the ramping up to full production from the Ramu Nickel and Cobalt mine by then.

• BPNG’s employment index revealed that PNG’s total employment data fell abruptly over the past year mainly due to slowdown in mining sector activities while employment in the non-mining sector improved. This illustrates a period of realignment within the economy following the completion of the LNG construction phase.

• NBPO announced that Kulim will seek shareholders’ approval through an Extraordinary General Meeting to be held on 03/12/2014. Kulim’s earlier announcement regarding its intention to accept the Sime Darby’s cash takeover offer subject to its shareholders approval in extraordinary general meeting for Kulim to dispose of its entire 49.0% interest in NBPO.

• This week’s BPNG auctions in Treasury Bills was under subscribed by K12.0m for 182 days with a weighted average yield of 4.6% and K28.7m for 364 days with a weighted average yield of 7.4%.

• The KSi index declined by 2.4% to 3,625.9 while KSi Home Index rose 0.2% to end the week at 9,480.1.

International Market Summary

• Asian equities retreated this week as data showed the region’s two largest economies struggling, with Japan falling back into recession and Chinese factory activity at a six-month low. The yen is the worst-performing major currency versus the US$ this month after Japan’s central bank boosted record stimulus and Abe shelved plans for a sales-tax increase.

• The US$ has benefited from a US economy that’s strengthened enough for the Federal Reserve to end its dollar-debasing bond-buying program and consider the timing of its first interest-rate increase since 2006. That contrasts with Japan and the euro region, where officials are baIling deflation with further stimulus policies amid record-low interest rates.

• Oil prices appeared to strengthen from sliding further down following reports that oil producing countries are going into ‘arbitration’ over the supply of oil to the market. WTI and Brent were marginally up c.1.4% to $75.6 and $79.3 respectively
• Gold headed for a third weekly advance after rallying to a two-week high as investors weighed signs of increased purchases against expectations for higher borrowing costs in the US. Bullion for immediate delivery traded at $1,192.0.

• Westpac are forecasting the A$ to rise to 0.9200 in 2015 noting the attractive yields of Australia’s government bonds (3.3% is world’s highest yielding AAA sovereign).

• OSH closed below $8.0 on Thursday 20 November, amid uncertainties over the “price war” between major oil producing countries. Reports on Bloomberg are showing that other analysts and investors are upbeat on OSH, despite, share price trending global oil price. Current share price is up 4.7% to $8.75, suggest that OSH could be forming a resistance to falling further (refer to graph in the PDF attachment below).

• To end the week, PNG/USD was unchanged at 0.3929 while PGK/AUD appreciated by 1.8% from 0.4538 to 0.4572

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

pdfKFM Weekly Investment Update: Friday, 21 November 2014

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