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KFM Weekly Investment Update: Friday, 28 November 2014

Local Market Summary

• Prime Minister Hon. Peter O’Neil revealed this week that China will fund several major impact projects in PNG. PM Peter O’Neill along with his delegation signed several agreements with the Government of China.

• The 13th PNG Mining and Petroleum Investment Conference that takes place next week in Sydney is an important event that shall focus on PNG’s growth.

• Trade Commerce and Industry Minister Hon Richard Maru reported that the final design works of the Pacific Marine Industrial Zone project by the contractors is nearing completion. Mr Maru said the government allocated K33.8m towards this project in the latest Budget and expects it to be delivered in the next 12 months.

• Nautilus says that PNG government’s acquisition of 15.0% stake in Solwara 1 project for a total value US$120.0m (K297.4m) is expected for completion by next month. The government has nominated Eda Kopa (Solwara), a subsidiary of Petromin PNG Holdings Ltd to partake in the project.

• Arbitration talks between InterOil, Total and Oil Search (OSH) will take place in London by the end of this month. The dispute derived from InterOil executing a deal worth US$3.6b (K9.0b) to sell Total a major share in the Elk-Antelope project in March 2014. Soon after OSH contested the deal as they had acquired 22.8% of the Elk-Antelope from a small partner of the project.

• Petroleum and Energy Minister Hon Nixon Duban stated that the government has full confidence in renewing the licence for PRL 15 (Elk and Antelope gas fields) by April 2015. Mr Duban said the project is massive and would cost between US$15.0b to US$20.0b equivalent to K33.0b to K45.0b.

• Kina Asset Management Limited (KAML) shareholders approved Monian to increase its shareholding in KAML to 25.0% from current stake of 19.9% through a special general meeting. Monian has six months to take up the option.

• This month’s BPNG GIS auction was oversubscribed by K79.6m with a total of K83.5m bids successful. Rates were down from last month’s auction with 2017 bonds yielding 8.0% in the shorter term bonds while 2031 bonds yielding 14.5% at the long-end. The T-Bills were under subscribed by K9.4m for 182 days with a weighted average yield of 4.6% and K3.5m for 364 days with a yield of 7.4%.

• For the week, both KSi index and the KSi Home Index was up 0.9% and 4.0% to 3,656.8 and 9,860.7 respectively.

International Market Summary

• Ten-year US Treasuries, which didn’t trade last session because of the Thanksgiving holiday, climbed for a sixth day, pushing yields down four basis points, or 0.04 %, to 2.2%. South Korea’s benchmark three-year note paid 2.1%, close to a record low.

• The Asia-Pacific measure rebounded 5.3% from an Oct. 17 low through yesterday as the Bank of Japan expanded bond purchases, China cut interest rates and speculation grew the European Central Bank will take more stimulus measures.

• Japan’s consumer price index slowed a third straight month amid tumbling oil prices, challenging the BOJ’s efforts to stoke inflation. Japan’s Topix index advanced 1.3% as the yen’s retreated.

• OPEC kept its production ceiling steady at yesterday’s meeting in Vienna, resisting calls from Venezuela to cut output. Bonds rallied as the rout in crude damps inflation, with price growth slowing in Japan and Germany and consumer costs retreating in Spain.

• Russia’s ruble tumbled 1.8 % to 49.5 per dollar, a record low, and decreased 1.3% to 61.7 versus the euro. The currency has lost c.10.0% in four days versus the greenback.

• Tony Abbott is suffering the biggest fall in public approval for a new government in 30 years as he faces a similar attack on his integrity.

• Brent crude slipped 1.6% after yesterday’s 6.7% rout, trading at $71.4 a barrel in London, bringing this year’s slide to 36.0%. WTI is down c.11.0% this week, the most since 2011.

• Gold sank to $1,187.982 an ounce, bringing its three-day slump to 1.1%. The precious metal, used as a hedge against inflation, is still up 1.0 % in November after two months of declines. Silver retreated 0.6 % to $16.15 per ounce, pushing it down 1.8% this week.

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

pdfKFM Weekly Investment Update: Friday, 28 November 2014

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