KFM Weekly Investment Update: Friday, 28 August 2015

Local Market Summary

• PM Hon Peter O’Neill stated at the conference in Australia that the country’s economic outlook remains positive despite the decline in commodity prices. PNG continues to experience an unprecedented period of growth and economic expansion and reaffirmed the need to monitor developments in commodity prices, and undertake responsible adjustments. The 2015 Budget is expected to be revised in October

• BPNG says the Government’s total expenditure of K5.5bn, plus revenue and grants of K4.4bn are below the budgeted levels. BPNG Governor Mr. Loi Bakani said this had resulted in a deficit of K0.9bn or 1.8% of nominal GDP, which were the result of a sharp decline in commodity prices meant the expected revenue inflows into the budget were on a sharp declining trend. This has and will adversely impact tax receipts from the resource sector and sectors affected by it, foreign exchange inflows, level of foreign exchange in the market, exchange rate movement and expected level of foreign exchange reserves

• PNG has become the largest trading partner and the most important investment destination for China in the Pacific region, according to China’s Ambassador to PNG Hon Li Ruiyou. The total trade volume between PNG and China reached US$2.0bn (K5.5bn) and is expected to increase this year as China plans to purchase 2.0m tonnes of PNG-LNG

• Sir Nagora Bogan announced this week the Tax Review Committee recommends the income tax threshold be raised to K15,000, corporate income tax reduced to 25.0% as well as a raise the GST to 15.0%. The Committee also recommended the improvement of the Land and Property Tax system and the introduction of a Capital Gains Tax as well. The committee also recommended that the Government should establish a National Economic Development Board to ensure discipline in smart and effective use of tax incentives

• Feasibility studies will now be carried out in the Sepik Plains, East Sepik, for development of large scale oil palm project following an agreement signing between the Government and Malaysian company, Kuala Lumpur Kepong (KLK). This agreement means that the company will meet the cost of the feasibility study and the environmental plan, which it must develop and present to cabinet within the next six months

• BSP recorded a consolidated operating profit after tax of K266.9m for first half, a 1.7% increase compared with the corresponding period last year. Total assets increased by approximately K755.0m to K16.6bn. Group revenue was slightly down at K795.7m, representing a decrease of 4.0% due to the challenging economic condition and the reduced margins on foreign exchange. BSP also announced that it will be paying a K0.225 dividend based on its performance

• Oil Search (OSH) has recorded a net profit of US$227.5m (K596.96m) after tax for the first half of 2015. OSH MD Mr Peter Botten said OSH achieved a strong operational and financial start to 2015, reporting a near three-fold increase in production, a 69.0% increase in sales revenue and a 49.0% increase in net profit after tax, which was achieved despite significantly lower global oil and LNG prices in the first half of 2015. OSH also announced a US¢6.0 dividend for its shareholders

• This week’s BPNG auctions in Treasury Bills were oversubscribed by K67.3m out of the K150.0m on offer. Weighted average yields were 4.6% for 182 days and 7.4% for 364 days from this week’s auctions

• Both KSi Index ended the week up by 2.3% to close at 3,455.96 points while the KSi Home Index ended the week flat up by 0.2% to close 9,646.15 for the week

International Market Summary

• To close-off the week the stock markets around the world have rallied and crude oil rebounded after strong US economic data and hints from a US Federal Reserve policymakers that an interest rate hike was unlikely. All three major US indices rose for the week. The Dow Jones industrial average was up 364.8 points, or 2.2%, at 16,650.3, the S&P 500 gained 2.4% to 1,987.9 and the Nasdaq Composite added 2.5% to 4,812.7

• Again, on a positive note European shares showed gains across the board after market expectations of a US rate hike were pushed back and as economic growth figures were revised sharply upwards. In Europe, Germany’s DAX , France’s CAC 40 and Britain’s FTSE 100 were all up for the week

• Japan’s Nikkei share average surged more than 2.0% on Friday, helped by further gains on Wall Street after strong US economic data buoyed sentiment that had been shaken by fears of a China-led global economic slowdown. The US$4tn Shanghai Composite closed 4.8% higher on Friday thanks to another late rally

• ASX investors have taken heart from a recovering Chinese market, while surging commodity prices have pushed resources stocks higher. The ASX 200 closed 0.9% higher at 5,263.6

• US oil prices soared, to close-off the week, as a rally in Chinese and US stocks and better-than-expected US economic data prompted a rush by traders to bail out of bearish bets that the market would fall. Light crude closed 5.9% for the week at UD$42.9 while Brent surged 4.9% closing the week at US$47.7 per barrel

• PGK/USD lost 0.8% to 0.3565, while PGK/AUD appreciated by 0.9% to close at 0.4972 for the week

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pdfKFM Weekly Investment Update: Friday, 28 August 2015

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