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KFM Weekly Investment Update: Friday, 23 January 2015

Local Market Summary

• The World Bank said that the decline in the price of oil will affect the PNG’s economy. The bank pointed to the following factors; the duration of the prices slump, terms of contract for LNG, increase in domestic spending, negative effect on oil and gas firms and positive impact on consumer.

• PNG’s non-mining economy is expected to recover to around 4.0% in 2015, the World Bank says. This is mainly due to the construction of the 2015 Pacific Games facilities and the continuous upgrading of roads.

• Wilmar International has pulled out of the deal to develop Sepik Plains oil palm project in East Sepik because it could not come to terms with the State on fiscal terms, Trade Commerce and Industry Minister Hon Richard Mara announced this week.

• Landowner group representatives in the Autonomous Bougainville are eager to work along with their government to sanction mining activities in their region to boost economy and fast track development. The Bougainville Mining Act is anticipated for approval in March this year by the Autonomous Government.

• National Petroleum Company of PNG (NPCP) has declared and paid a dividend of K415.6m to the state for the year ending 31/12/14. NPCP managing director, Mr Wapu Sonk said that the early delivery of the LNG project resulted in the NPCP receiving distributions earlier than forecast.

• Mr Thomas Abe was appointed as the new managing director for Petromin PNG Holdings. Mr Abe served in the past as the chief executive officer of the Independent Consumer Competition Commission.

• PNG LNG project’s 120 day operational test period was completed successfully. The test is one of several tests required and an important milestone towards satisfaction of the financial completion tests set in the project’s financing arrangements. When financial completion has been achieved, guarantees will be released, loan repayments will start and co-venture distributions will be permitted.

• The National Superannuation Fund said that it paid K347.0m in 2014 to members who were unemployed, retired and seeking housing advance. Unemployment was indicated by the superfund as the main category with payments amounting to K161.9m. The significant payout was the result of 21,090 members being unemployed permanently by the end of 2014.

• Airlines PNG announced that its Annual General Meeting will be held on 25/02/15 at the Grand Papua Hotel in Port Moresby.

• This week’s BPNG auctions Treasury Bills were undersubscribed by K22.0m for 182 days with a weighted average yield of 4.7% and undersubscribed by K80.3m for 364 days with a weighted average yield of 7.4%.

• The KSi index was up by 3.8% to 3,585.3 from 3,454.5 while KSi Home Index was down for the week losing 0.1% at 9,459.2 from 9,463.5.

International Market Summary

• Mario Draghi the European Central Bank (ECB) president stressed its commitment to a quantitative easing (QE) program worth at least €1.1 trillion euros to negate the threat of a deflationary spiral. Mr Draghi withstood strong opposition from German officials in the ECB’s executive board.

• In light of the ECB’s announcement the DAX was up by 2.6% to 10,435.6.

• The S&P 500 rose 2.2% to 2,063.2, giving its fourth straight run of gains for its longest streak so far in 2015. This was in response to the ECB’s pledge to the European economic stimulus package.

• The Hang Seng Index added 2.9% to 24,807.9 its highest level since 08/09/14 as markets digested the ECB’s QE commitment. Nikkei followed the same trend gaining 3.8% to close at 17,511.7.

• In Australia S&P ASX200 caught on to the positive trend in global markets stemming from the ECB’s QE commitment by gaining 3.8% to end the week at 5,501.8.

• On Wednesday, the oil prices rose after the death of King Abdullah of Saudi Arabia, the biggest producer in OPEC then lost ground on Thursday. By the week’s end: WTI was US$47.1 per barrel and the Brent US$49.5 a barrel.

• Gold rose by 1.5% on Friday to close the week at US$1,295.5 on the back of the EXB expanding stimulus measures.

• To close the week PGK/USD depreciated by 0.3% to 0.3834 while PGK/AUD appreciated by 2.7% to 0.4801.

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pdfKFM Weekly Investment Update: Friday, 23 January 2015

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