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KFM Weekly Investment Update: Friday, 25 August 2017

Local Market Summary:

•Deputy Prime Minister and Treasurer Charles Abel in a meeting with Internal Revenue Commission advised that he had noticed there has been a drop in taxes from the mineral sector over the past 10 years and raised concern of why taxes were not collected from the export of gold, oil and gas to fund the Government’s development plans. He said that the current tax collection system is complicated and advised to look at a simple tax system so that everyone paid taxes

•The new Mining minister Johnson Tuke is working on establishing an independent audit into all shipments of Gold with its offshore refineries. He said this is one of the two discussion papers that will be implemented including the formalization of small-scale alluvial mining. He reiterated that the two initiatives were introduced after the mining industry experienced less number of new investors over the last ten years

•The exploration expenditure has dropped in the mineral sector, according to a survey carried out by the Chamber of Mining and Petroleum. The report stated that expenditure dropped from K944.3m in 2011 to K325.5m in 2015 due to decreases in commodity prices which resulted in steady fall of exploration licenses (ELs). The Chamber of Mining and Petroleum reported that Mineral Resource Authority granted 131 ELs with 81 applications in April 2017 which showed a fall from 2012 with 177 granted ELs and 379 applications. The chamber explained that the declined will directly affect the rural economy

•Paul Sayer was appointed as the new CEO of Nambawan Super (NSL) replacing Gary Tunstall who completed his term last year. NSL board chairman Anthony Smare said Paul Sayer has extensive experience in all facets of superannuation with high commitment towards innovation. Mr Sayer said he was pleased to work and achieve the retirement outcomes for NSL members and also to play a role for the wider community through funds investment

•According to Port Moresby Stock Exchange, Bank South Pacific (BSP) released its 2017 Half-Year results announcing a consolidated operating profit after tax of K370.9m. BSP board chairman Sir Kostas Constantinou stated that the positive results reflected the great performances of all the firm’s subsidiaries together with additional growth in balance sheet. Sir Kostas also announced an interim dividend payment of K0.32 for 2017 to be paid on 20th October 2017

•Oil Search (OSH) announced through POMSoX the first half year results of 2017 with a net profit of US$129.1m, up by 21% from 2016 full year profit. The positive results was attributed to the increase in sales revenue by 16% to US676.2m, a reduction in operating costs by 12% to US8.82 per boe and 13% drop in depreciation and amortization expense. The firm also announced the 2017 interim dividend of US$0.04 per share approved by its Board to be paid out to shareholders on 26th September 2017

•Kina Securities (KSL) reported a statutory profit of K3.0m and an underlying profit of K10.0m for the first half year result of 2017. The firm explained that the drop in earnings compared to 2016 corresponding period was mainly due to lower income from foreign currency (FX) trading reflecting the effect of the withdrawal of its correspondent banking partner. However, the company stated that it continued to grow in all of its businesses apart from income earned from FX trading. The directors also announced an interim dividend of AUD0.02 cents (K0.05) per share payable on 29th September 2017

•This week’s BPNG auctions in Central Bank Bills were offered for 28 days only with full-subscription of the total amount of K344.5m offered, The weighted average yield remained unchanged at 1.37% from the previous week

•This week’s BPNG auctions in Treasury Bills were over-subscribed by K8.4m out of a total amount of K91.4m on offer. Weighted average yields for 182 days, 273 days and 364 days remained unchanged at 4.74%, 6.71% and 7.97% respectively

•The KSi Index closed the week at 4,983.11 points while and KSi Home Index increased by 0.1% to end the week at 11,001.74 points

International Market Summary:

•Markets saw mixed results for the week as central banks across the globe gathered for their annual meeting at Jackson Hole in Wyoming, US. Key speakers at this meeting will be Janet Yellen of the US Federal Reserve and Mario Dragi for the European Central Bank as investors around the world wait on their speeches for hints on the outlook for interest rates and monetary policy stance

•Asian stocks were mixed with Japan’s Nikkei index down 0.1% while the Hang Seng index and Shanghai composite were up 2.8% and 1.7% for the week as major constituents posted strong earnings results

•European stocks fared well for the week with FTSE 100 and German DAX index were both up 1.1% and 0.1% respectively as investors seek clarity from Mario Draghi’s speech on their monetary policy stance

•The US dollar index, which tracks the performance of the US dollar against major currencies, managed to strengthen after weakening in the week prior on the US President’s threats on social media to ‘shut down the government’ due to lack of funding for construction of the proposed border wall between the US and Mexico. The EUR/USD and GBP/USD were down 0.3% and 0.7% respectively as a result of a positive week for the US dollar

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pdfKFM Weekly Investment Update: Friday, 25th August 2017

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