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KFM Weekly Investment Update: Friday, 22 April 2016

Local Market Summary

• Chairman of BSP Group, Sir Kostas Constantinou OBE, has announced that Standard & Poors (S&P) has issued a revised rating assessment of BSP. S&P, in its Report released on 21 April 2016, continued to affirm its ‘B+’ longterm and “B” short term ratings outlook on the Bank. At the same time, S&P’s long-term issuer credit rating outlook for BSP remains unchanged at negative. Sir Kostas said that the re-affirmed rating reflects the Bank’s strong domestic market position, extensive distribution model and significant investment in information technology and sustainable profitability

• Kina Securities (KSL) has appointed Mr Isikeli Taureka as a director of the company. Mr Taureka, currently an executive director at InterOil Corporation, was previously InterOil’s executive vice-president in PNG. KSL chairman Sir Rabbie Namaliu said they were delighted to have Mr Taureka because of his knowledge of the business sector in PNG and brought a wealth of finance expertise

• Oil Search has recorded a drop in total revenue by 9.0% for the first quarter of this year. In its quarterly report, total revenue for the quarter was US$313.1m, compared to US$342.9m in the fourth quarter of last year. The report stated there was a stronger sales volume, particularly from the LNG, offset by a 19% decline in average realised oil and gas prices, and total production of more than 7.7 million barrels of oil, 3.0% higher than last quarter

• Furthermore, Oil Search Managing Director Peter Botten said, at current oil price levels, Oil Search will generate sufficient cash flow to not only cover operating costs, all debt servicing and sustaining capital expenditure, but also surplus cash for reinvestment and return to shareholders

• New Guinea Energy will be de-listed from POMSoX effective as of June 29 because it has been experiencing minimal trading. Executive chairman David Lamm said the company has K30,000.00 worth of shares listed on POMSoX and the annual cost of maintaining the listing was in excess of this amount

• Harmony Gold Mine, in their latest drilling results confirmed beliefs that Kili
Teke in the Hela Province has the potential to develop into a major porphyry
copper-gold system. CEO Peter Steenkamap said that massive sulphide Iodes averaging 13.0% copper and 11.4g/t are even rarer which is what they are seeing from the results

• CPL Group is feeling the effect of the lack of foreign currencies in the country
to import supplies. CEO Ravi Singh said there is an impact on the payments we make to our overseas suppliers. Singh said the company is still importing without major problems because of the understanding it has with its long term suppliers

• American based construction company, Pernix Group Inc. has decided to bring its construction and operations capabilities to PNG. Group CEO and President Nidal Zayed said their entry into PNG is with confidence in the country and the positive economic growth outlook in the coming years as projected by Asian Development Bank

• This week’s BPNG auctions in Central Banks Bills were only offered for 28 and 63 days with an oversubscription of K17.2m out of the total of K545.0m on offer. The weighted average yields were 1.1% and 2.4% respectively. KFM expects short term rates to remain flat around current levels

• This week’s BPNG auctions in Treasury Bills were undersubscribed by K100.9m out of K254.3m on offer indicating weak appetite for the short term securities. Weighted average yields were 2.8% for 91 days, 4.6% for 182 days and 7.7% for 364 days

• The April GIS auctions saw an oversubscription by K17.0m out of K39.0m on offer. The weighted average yields for the series 2019, 2021, 2025 and 2029 were 9.0%, 11.8% and 12.0% respectively

• Both KSi Home Index and KSi ended the week lower by 0.8% to 9,112.9 points and 6.2% to 3,852.5 points respectively, underpinned by a decrease in share price of Newcrest Mining

International Market Summary

• US stocks closed lower Thursday, breaking a three-day winning streak, as big declines in defensive sectors such as consumer staples, telecoms and utilities weighed on the main indexes. The S&P 500 ended 10.9 points or 0.5% lower at 2,091.5 points and the DJIA fell by 113.8 points, or 0.6%, to 17,982.5

• European stock markets ended an up-and-down session modestly lower on Thursday, after the European Central Bank (ECB) reaffirmed its commitment to tackle low inflation and flagging growth, but stopped short of hinting at any further stimulus measures. ECB President Mario Draghi said the ECB remains ready to step up stimulus if the outlook for the euro area worsens, while adding that risks to the euro-area outlook are tilted to the downside

• Asian stocks retreated from an almost five-month high as a stronger yen weighed on Japanese shares and investors assessed earnings. The MSCI Asia Pacific Index fell 0.6% to 133.41 for the week. The measure is headed for a 0.9% gain this week, its third straight such advance.

• Australian stocks were lower after the close of trading, as losses in the metals & mining, materials and resources sectors led shares lower. The ASX fell 0.7% to 5236.4, while the All Ords lost 0.7% to end at 5299.2

• PGK/USD was up by 0.1% for the week ending at 0.3197 whilst PGK/AUD down 0.4% to close at 0.4123

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pdfKFM Weekly Investment Update: Friday, 22 April 2016

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