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KFM Weekly Investment Update: Friday, 26 September 2014

Local Market Summary

• The national budget strategy for 2015 remains largely unchanged from 2014 in that it would be a deficit budget, Finance Minister James Marape has announced.

• The Government’s plans on the Sovereign Wealth Fund (SWF) still remains unclear since the parliament sitting last month. Dr Mark Evans from the Pacific Policy Institute in Vanuatu said that plans for natural resource governance were ambitious:

• Air Niugini Ltd announced a reduction in fuel surcharge for both domestic and international routes, effective as of 22/09/14. Chief Executive Officer Simon Foo said the drop in the fuel surcharge was due to a reduction in fuel prices on the world market and also the current exchange rate.

• The exports of alluvial mining will double in the next five years and possibly be worth more than K1.0b per annum, Mining Minister Bryon Chan says. According to the flexi data collecting system, there are currently 183 alluvial mining leases, and 175 conversion tenements or claims which represent around 40% of total tenements in Papua New Guinea (PNG).

• Southern Highlands Governor William Powi has engaged an Israeli company to establish a coffee factory in the province. The coffee factory will be relief for many coffee growers as coffee is a predominant source of cash income in the province.

• Melanesian Trustee Services (MTSL) as the trustee and interim fund manager for Pacific Balanced Fund (PBF) this week announced a total of K12.0m payment to its unit holders as dividends. Chief Executive Officer Kennedy Wemin said PBF closed in an operating profit after tax of K109.8m for the CY2012. MTSL has also stated that the PBF accounts for the last ten years were not audited.

• A dividend of K25.0m has been paid to Treasury department this week by the National Fisheries Authority (NFA). According to the NFA Managing Director John Kasu, the revenue was from licence fees from companies that harvest fish stocks from PNG’s waters.

• Felda Global Ventures (FGV), a Government-linked corporation remains interested in the New Britain Palm Oil Ltd (NBPOL) even though Malaysian multi-national Sime Darby appears to be the preferred bidder for a 49% interest in NBPOL.

• This week’s BPNG auctions in Treasury Bills were over subscribed by K41.0m with slight increases in both 182/364 days weighted average yields rate from last week to 4.5% and 7.3% respectively.

• Bank South Pacific Ltd has reduced the share buyback price to K7.30 from K7.45 effective as of 24/09/14.

• The KSi index was down by 0.1% at 3,746.24 while KSi Home Index was flat for the week at 8,147.01.

International Market Summary

• European stocks declined for the week as investors awaited data on US gross domestic product to gauge the outlook for interest rates in the world’s largest economy. US stock-index futures were little changed, while Asian shares fell slightly.

• US GDP grew 4.6% in the second quarter, more than the previous estimate of 4.2% released in August, according to a Bloomberg News survey of analysts before a Commerce Department report this week. The Thomson Reuters/Michigan consumer-sentiment index rose to 84.8 this month, the highest in more than a year.

• A bleak perception of the labour market conditions has seen sentiment among Chinese consumers at the lowest level since the fourth-quarter of 2011. The Westpac-MNI China consumer sentiment index came in at 113.8 points for the third quarter of 2014, the worst quarterly outcome since a 112.8 reading almost three years ago.

• Australia’s biggest oil and gas producer, BHP backed plans to develop what may be the world’s largest floating liquefied natural gas project, saying it’s “fully aligned” with partner Exxon Mobil Corporation. BHP, the world’s largest mining company, will weigh the proposed Scarborough floating LNG development off the west coast of Australia against other investments.

• Gold price rallied on the back of safe haven outflows from equities as Asian stocks took a down turn on the S&P 500 index hitting its lowest in two months (see chart in the PDF attachment below).

• Light Crude was up by 0.1% to US$92.5 while Brent crude was down 1.5% at U$96.9

Click on the link below to view full report in PDF.

pdfKFM Weekly Investment Update: Friday, 26 September 2014

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