KFM Weekly Investment Update: Friday, 26 June 2015

Local Market Summary:

•An increase in the minimum wage rate by 16 toea to K3.36 per hour was announced by
Department of Labour and Industrial Relations. The increase will be effective from
03/07/15 for all minimum wage earners. It is understood that over 80,000 workers in
the wholesale retail business and hotel industry would be affected by the wage increase
while there are exemptions available for businesses in the agricultural sector

•Department of Works budget looks to be cut by K237.0m amidst a National Budget
shor0all of ~K1.0bn, according to David Wereh, Secretary of the department. It is expected
that the August Supplementary Budget will source additional funding to ‘fill the
gaps’ he said

•Moody’s Investors Service have revealed that lower commodity prices have adversely
affected PNG’s fiscal balance and the country’s external payments position. In its credit
analysis of the country’s credit profile it reported that revenue has under matched budgeted
projections while the current account’s return to a surplus remained insufficient to
prevent the fall in foreign currency reserves. Moody’s said the government has yet to
strategize a move to credibly restore a path towards a balanced budget

•The National Petroleum Company PNG (NPCP) has reported a profit after tax of
US$167.0m (K463.8m) for 2014, largely attributed to PNG LNG Project. Chairman Frank
Kramer said last year was a successful year for the company despite low oil prices, especially
with the PNG LNG Project coming on stream early with its first cargo shipment last

•Kina Group reported a net profit of K44.2m in 2014 and forecasts its net profit to grow
to K45.3m (up 2.4%). Group CEO Syd Yates said the result was partially constrained by
costs associated with the Maybank PNG acquisition to be completed in the coming

•Kina Group is on track with its initial public offering (IPO) expected to be finalised by
the end of July 2015. CEO Syd Yates and board chairman Sir Rabbie Namaliu extended
an invitation for investors to invest adding that Kina Securities is offering K97.0m fully
paid ordinary shares at a price of K2.08 (A$1.0) of which it aims to raise ~K202.0m
(A$97.0m) with a market capitalization of K341.0m (A$164.0m). Furthermore, Kina
announced the inclusion of former CEO of Suncorp Bank David Foster as a non-executive

•Independent Public Business Corpora on (IPBC) handed over the Lae Tidal Basin to PNG
Ports Corpora on Limited (PNGPCL). The K1.0b worth port was the initiative of the IPBC
along with other stakeholders. The two organisations signed a memorandum of agreement
(MoA) signifying the transfer of ownership the port from IPBC to PNGPCL as phase
2 of the project commences. The signing of the MoA also marked the involvement of
PNGPCL in phase 2 of the port. The tidal basin project was commissioned after completion
on in December 2014

•PNG’s first listed investment company, Kina Asset Management Ltd (KAML) regained
momentum in Q1 2015 with an investment gain of K1.3m, representing a year-to-date
nominal return of 2.8%. KAML’s por0olio grew by K2.4m, from K48.0m at the end of
2014 to K50.4m in Q1 2015. Furthermore, KAML AGM will be held on 30/06/15

•This week’s BPNG Treasury Bill auction was undersubscribed by K109.7m out of the
K200.0m on offer across both 182 and 364 terms. Weighted average yields were 4.5%
for 182 days and 7.2% for 364 days from the week’s auctions

•The KSi index was flat from the previous week while the KSi Home Index ended the week
higher 0.4% to 9,758.4

International Market Summary:

•US stocks fell this week, as Greece’s bailout talks with creditors appeared set to stretch
into the weekend

•US oil prices edged back below $60.0 a barrel, extending losses for a second day after
government data showed a surprise increase in inventories of refined fuels such as

•Gold prices fell as hopes for a deal between Greece and its creditors drove investors out
of the safe-haven metal, while large stockpiles and potentially weak demand pushed
platinum and palladium to multi-year lows

•Japan’s Nikkei stock market rose to its highest level in more than 18 years, buoyed by
optimism that Greece is moving closer to a bailout deal with creditors, while China
shares continued to gain their foo ng following a volatile streak (see graph)

•Chinese stocks tumbled, with the Shanghai Composite Index heading for its biggest loss
in eight years, amid mounting concern that the nation’s longest-ever bull market has
peaked (see graph)

•PGK/USD ended the week lower by 0.3% to 0.3645 while PGK/AUD was up for the week
by 0.6% to 0.4733

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pdfKFM Weekly Investment Update: Friday, 26 June 2015

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