KFM Weekly Investment Update: Friday, 22 May 2015

Local Market Summary:

•Treasury Department has indicated that a budget review is likely with consultations to be
held with department heads to see where cuts can be made. This review will form the
basis for a Supplementary Budget that will be presented by the Treasurer for parliament
approval. Treasury Secretary Mr Dairi Vele announced that planning was needed in the
light of the fall in world commodity prices that has affected revenue and PNG’s international

•PNG’s B1 foreign currency and local currency issuer ratings have been confirmed by
moody Investors Service. The rating outlook was also changed to negative from stable.
According to Moody, the key drivers for its decision to rate PNG’s foreign and local currencies
were based on:
(i) Fiscal deterioration resulting primarily from a step-up in spending since 2012; and,
(ii) A weakened external payments position and increased external vulnerability

•Kina Group, the country’s largest non-banking financial institution, announced its
K319.0m plus acquisition of Maybank PNG. Kina CEO Mr Syd Yates announced the good
news highlighting that the acquisition of Maybank PNG will see Kina become the fourth
-largest bank in PNG with a lowered cost of wholesale funding, creating a strengthened
competitive position and future growth opportunities for the company. Mr Yates said
Maybank PNG provided a natural fit to Kina, with much in common already the acquisition-
“on allows Maybank PNG and Kina Group customers access to a broader range of
banking and financial services and products under one roof

•Bank of South Pacific held its AGM today (22/05/15) and all resolutions were accepted.
The group’s full year 2014 profit a6er tax was K507.3m which is 16.1% increase on the
pcp of K436.8. The result was attributed to strong growth in interest income; loans and
advances which increased by K116.0m to K6.8b. The final dividend for 2014 is 56 toea.
The price on the POMSoX remained @ K7.4

•Oil Search (OSH) reaffirmed its commitment to the drilling phase of the PPL 339 license
area in Gulf under the terms of the current agreement with Kina Petroleum (KPL). In
accordance with the agreement, OSH will commit to drill a well in return for acquistion of
a 70.0% participating interest in, and the operatorship of the licence while KPL will participate
with a 30.0% interest

•The Port Moresby Stock Exchange (POMSoX) suspended the annual trading of Airlines
PNG (APNG) on the securities exchange. POMSoX’s board deemed the halting of trade on
the local exchange appropriate as APNG had not submitted their annual report to POMSoX.
Under the listing rules annual reports are essential for the market to be informed
about the company

•Nautilus announced it has been named as one of the top 50 performing companies on the
OTCQX marketplace last year. The OTCQX Best 50 is the first ever annual ranking of
strong performing US and International Companies. Nautilus’ CEO Mr Mike Johnston said
that this was a reflection of the hard work that the team has put in over the last year

•This week’s BPNG auctions in Treasury Bills were oversubscribed by K40.9m out of the
K100.0m on offer across both 182 and 364 terms. Weighted average yields were 4.6% for
182 days and 7.3% for 364 days from last week’s auctions

•May’s GIS auction results from the K200.0m worth of bonds for the following series on
offer: 2018, 2020, 2022, 2023 were as follows 9.7%, 10.7%, 11.1% and 11.5% respectively.
Overall the auction was undersubscribed by K63.3m

•The KSi index ended the week 1.4% lower from the last week at 3,556.07 and the KSi
Home Index gained 0.2% during the week to close at 9,786.41

International Market Summary:

•US stocks advanced, with the S&P 500 rising to an all-_me high, amid better-than-forecast
results from and Best Buy while gauges on the strength of economic
growth were mixed and energy shares rallied with oil. The DJIA and S&P 500 closed
the week flat 0.1% and 0.4% higher at 18,285.74 and 2,130.82 respectively

•European shares were mixed for the week, recovering from lows a6er data pointed to
contrasting fortunes in major euro zone economies

•Asian shares rose on Friday a6er Wall Street set another record high with prospects for a
Federal Reserve rate hike in June all but quashed, while the dollar was on the defensive
a6er downbeat US data. Tokyo’s Nikkei rose 0.2% to a 15-year high at 20,264.41 points

•The ASX share market has closed marginally higher, eking out a gain in the last minutes of
trade, but not nearly enough to prevent a weekly fall. ASX 200 closed the week 1.2%
lower at 5664.70 points

•Crude futures are in their longest winning streak since records began in 1983, helped by a
drop in crude and product stockpiles, reflecting better demand in the world’s largest oil
consumer. Light Crude (WTI) closed the week 1.5% higher at US$60.6 per barrel

•PGK/USD lost 1.2% to 0.3716 and PGK/AUD appreciated by 2.4% to close at 0.4706

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