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KFM Weekly Investment Update: Friday, 27 March 2015

Local Market Summary

• National Planning and Monitoring Minister, Hon Charles Abel said that a K20.0m tourism program will start in 2016 for direct flights from Brisbane to Gurney, Kokopo and Kavieng on the new F70 Air Niugini aircraft. The program will also involve certain airport and fuel provision upgrades, product packaging and marketing and visa/customs requirements to boost tourism.

• New Bougainville Mining Act was passed in the Bougainville House of representatives. The act gives exclusive mineral rights to landowners which gives landowners the right to refuse any new and existing exploration and mining licenses. The act also discards the existing mining licenses held by Bougainville Copper Ltd (BCL). However, BCL will be allowed exploration licenses. The move will enable the Autonomous Region of Bougainville (ARB) Government to consider alternate options if BCL is unwilling to return to mining or refuses to comply with ARB Government/landowners terms and conditions.

• Bank of PNG (BPNG) Governor, Mr Loi Bakani said tougher penalties will be imposed on companies that do not comply with foreign exchange control directives issued by BPNG. Directives were issued for companies with vostro accounts that were accepting direct kina deposits by PNG residents, which was not permitted. Breaches of the directives would be dealt with by the bank in accordance with the Central Banking (Foreign Exchange and Gold) Regulation and penalties would include fines and imprisonment.

• Foreign exchange control directives issued by the bank are normal interventions taken by the BPNG, assistant governor Dr Gae Kauzi says. In explaining the situation on the supply and demand of foreign currency he said, “One may think that because the levels foreign currency liquidity was down, PNG was going into a bad situation. However, it should be noted that the country has US$2.1b (K5.5b) in foreign currency reserves which was still a comfortable level”.

• A ramping up of natural gas exports in PNG is expected to push the Pacific region’s average GDP growth to 10.7% this year. ADB’s annual economic publication, Asian Development Outlook 2015 (ADO) noted that most economies across the Pacific were expected to perform be6er this year due to favourable domestic and external conditions. In PNG, the first full year of LNG exports were expected to drive GDP growth to 15.0% this year and was expected to fall back to 5.0% next year.

• The first PNG LNG gas shipment to Japan last May has sparked an interest in Japanese businesses looking to PNG as a potential investment destination, Japanese Ambassador Mr Morio Matsumoto says. Mr Matsumoto said that this is an opportunity to further strengthen and enhance business relationships and economic partnerships between PNG and Japan.

• Sime Darby announced that it will exercise its right under Rule 21 of the Takeovers Code to compulsorily acquire all the outstanding New Britain Palm Oil shares which shareholders did not accept. Shareholders are entitled to elect their option for cash consideration in GBP7.15 or PGK28.79, similar to the prior offer. The acquisition notice released sets out the terms in completing the forms and submission before closing date 14/04/15.

• This week’s BPNG auctions in Treasury Bills were undersubscribed by K86.9m out of the K200.0m on offer. Weighted average yields remained flat at 4.7% for 182 days and 7.4% for 364 days from last week’s auctions.

• The KSi index ended the week 1.3% lower to 3,553.84 from 3,600.10. Similarly the KSi Home Index closed 0.1% higher for the week to 9,750.86 from 9,744.1.

International Market Summary

• US stocks fell for a fourth straight session on Thursday night but indexes ended well off session lows with support from economic data and earnings. For the week, the DJIA closed 2.4% lower to 17,678.23, the S&P500 lost 2.5%, to 2,056.15 and the NASDAQ dropped 3.2%, to 4,863.36.

• European shares fell for a second straight session, taking their cue from bearish sentiment on US and Asian markets, and weighed down by an escalating conflict in Yemen. For the week Germany’s DAX was 1.6% lower, France’s CAC 40 lost 1.3% for the week and the FTSE was also 1.8% lower closing the week at 6,895.33 points.

• Stocks in Japan suffered their steepest selloff since mid-January and most Asian markets were lower amid jitters about the pace of the US economic recovery. The Nikkei closed the week 1.4% lower for the week at 19,285.63 points.

• ASX: Ordinaries finished 0.7% up on Friday, but 0.3% down for the week at 5888.9, while the ASX: S&P/ASX 200 index was 0.7% higher for the day but down 0.9% for the week to 5919.9.

• Oil futures jumped past US$50.0 a barrel, headed for their fifth straight daily gain as Saudi Arabian airstrikes in Yemen raised fresh concerns over potential disruptions to crude supplies. Light Crude was up 10.0% for the week at US$50.3 per barrel (see graph in the PDF attachment below).

• Gold prices rose as an escalating conflict in the Middle East spurred investment demand for haven assets. Gold closed the week 1.5% higher at US1,202.2 per ounce.

• PGK/USD ended 0.5% lower for the week to 0.3755, similarly PGK/AUD depreciated 0.7% to close at 0.4799.

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

pdfKFM Weekly Investment Update: Friday, 27 March 2015

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