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KFM Weekly Investment Update: Friday, 27 July 2018

Local Market Summary:

● Prime Minister (PM) Hon. Peter O’Neil asserted that the economy is strong enough to sustain the country’s K24.0bn debt. Mr O’Neil also underlined that a large portion of debt was concessional borrowing which the government receives from International Monetary Fund, World Bank, Asian Development Bank and Exim Banks with similar interest rates however the government strategizes to borrow more on concessional loans rather than Treasury interests paid to the Central Bank.

● The Government is committed to broadening economic base of the country by exiting the current dependence on the commodity price cycle said PM Peter O’Neil. We need to broaden the base of our economy. Investment in small and medium enterprises (SME), investment in agriculture and investment in tourism are part of the initiatives that the government is putting in place. We are investing substantial amount of resource and partnering individual companies and companies that have invested substantial amount of money into agriculture and putting a lot of money into SME said PM.

● PM Hon. Peter O’Neil announced that the country will reach 70.0% electricity coverage by 2030 as one of Government’s key priorities and initiatives. The construction of a high voltage network from Tari to Hides, and to Mt Hagen and to connect to the Ramu network. PM Peter O’Neil said the objectives is to boost electricity capacity using cheaper, cleaner energy and pass savings back to the
people.

● According to Independent Consumer and Competition Commission (ICCC), the acquisition of Laga Industries by Paradise Company would not be affected by the amendment passed by Parliament this week. Parliament passed amendments to the ICCC Act for businesses to seek mandatory notification from the ICCC before undergoing mergers and acquisitions. The new amendments
give ICCC greater regulatory control of business pre-mergers and acquisitions that would be potentially anti-competitive.

● OK Tedi Chairman Sir Moi Avei thanked OK Tedi employees and contractors for their efforts even though the business was adversely affected by the earthquake in February which an interim dividend of K100.0m was declared by the Ok Tedi Mining board and was paid to the shareholders on Friday. Within that K100.0m, K67.0m was paid to the state and an equity of K33.0m was paid to the Fly River provincial government, Community Mine Continuation Agreement, villages and mine communities.

● This month’s BPNG auctions in Government Inscribed Stock were oversubscribed by K2.0m out of the total amount offered K70.0m. The weighted average yields for S15022021 was up 0.02% to 9.52%, while S15052022, S15052025 and S15112028 remained unchanged at 10.48%, 11.54% and 12.58% respectively from the previous month.

● This week’s BPNG auctions in Central Bank Bills were under-subscribed by K52.8m out of the total amount offered K666.4m. The weighted average yield for 28 days and 63 days remain unchanged at 1.40% and 2.35% respectively from the previous week.

● This week’s BPNG auctions in Treasury Bills were under-subscribed by K38.1m out of the total amount offered K184.9m. The weighted average yields for 91 days, 182 days and 273 days all remain unchanged from the previous week at 2.40%, 4.73% and 6.76% respectively. 364 days drop by 0.01% to end at 8.04% from the previous week.

● The KSi Index remained unchanged at 5,273.63 for the week while KSi Home Index decreased by 0.20% to end the week at 11,285.58. The decrease was mainly attributed to the drop in share price of Credit Corporation Limited.

International Market Summary:

● Global stocks rallied as trade tensions between the US and the European Union relieved with negotiations commencing between the parties to secure franchises to avoid a trade war.

● US shares broadly rallied although a large selloff in Facebook shares dampened the mood late week, posting the biggest single stock market wipe-out in American history, provided a strain on the Nasdaq index by 0.3% to end at 7,852.19. S&P500 increased by 1.2% to end at 2,837.44 for the week.

● European Market: European shares rose to a six-week high on Thursday as hopes of a breakthrough in US-EU trade talks boosted car makers, while the market also processed a spurt of company earnings reports. FTSE dropped by 0.3% to end at 7,663.17.

● Asian Market: China stocks ended lower on Thursday as months of see-sawing US-Sino trade friction stoked uncertainties over the country’s economic growth prompting investors to take a cautious stance. Nikkei drop by 0.8% to end at 22,586.87.

● The ASX closed on fresh 10-year highs to close 14 points higher to 6300, as a strong advance by BHP wipes losses made by AMP. The benchmark ASX200 index drop by 0.3% to end at 6,244.50 points.

● Commodities: Light Crude, Brent Crude and Gold all went up for the week by 0.2%, 2.7%, and 0.9% to end at 69.61, 74.54 and 1,235.30 respectively.

KFM Weekly Investment Update: Friday, 27 of July 2018

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