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KFM Weekly Investment Update: Friday, 29th September 2017

Local Market Summary

• The National government handed down a mini budget of K800.1m and was approved by Parliament during the week. Deputy Prime Minister and Treasury Minister Charles Abel said the government is taking bold steps in its 100-day, 25 –point plan to maintain budget deficit at 2.5% of GDP and debt to GDP ratio leveled at 32.1%, a drop from 32.4% from comparative period. He explained that expected revenue was reduced from K11.5m to K11.0m and expenditure and net lending was reduced to K12.9m from K13.3m in order to keep up the fiscal deficit position of the 2017 budget

• In the meantime, the parliament also sanctioned the amendments in the Fiscal Responsibility Act which now increases the GDP Ceiling range from 30 to 35% in order to assist the government in managing fiscal and financing policies through economic downturns

• Prime Minister Peter O’Neil revealed that the State has fully repaid the UBS loan with all accrued interest and made K120.0m from the sale proceeds of OSH shares.PM O’Neil also confirmed that K200.0m was held in a trust account with Central Bank and will be paid to the landowners after the completion of clan vetting process

• The PNG Tourism Promotion Authority announced plans to assist Air Niugini to resume flights between Port Moresby and Shanghai in China by next year. Director Marketing and Research Alice Kuaningi said China is becoming a major tourism market for PNG. She added that engagement was already made with China’s trade and investment sector in trainings and workshops to assist local operators to meet Chinese demands for tourism products in the country

• Oil Search MD Peter Botten said that the extractive sector can solve the problem of foreign exchange (FX) shortage in the country while doubling the production of natural gas by 2023 through commitment towards nation building. He said the sector has the capability to invest K60.0b for the next five years to grow businesses and fix the FX issue with the potential to continue production for more than 50 years

• The China Railway Construction Engineering Group (PNG) through its subsidiary Real Estate Company are embarking on to develop a new 23 stories office complex that will be erected in Port Moresby’s central business district. General manager Shengwei Li said the firm will inject K118.0m (USD37.0m) into the project which will comprise of 11 floors of offices and 7 floors of car park
including a sky garden and cafeteria. He added that the project is set to be completed in August 2019 and structural to be completed before the APEC summit in 2018

• This week’s BPNG auctions in Central Bank Bills were offered for 28 days only with an under-subscription of K23.0m out of total amount of K372.5m on offer. The weighted average yield for 28 days remained unchanged at 1.37% from the previous week

• This week’s BPNG auctions in Treasury Bills were over-subscribed by K4.0m out of a total amount of K308.1m on offer. Weighted average yields for 91 days, 182 days, 273 days and 364 days were 2.48%,4.73%, 6.73% and 8.00% respectively

• The KSi Index ended the week positively with a gain of 0.3% to close at 5,221.42 buoyed by the rise in share price of Bank South Pacific and Oil Search which ended at K9.60 and K17.16 respectively. The KSi Home Index was also up by 1.2% to close at 11,135.20 points

International Market Summary

• US stocks closed with slight gains but the advance was enough to record all-time highs for the Dow. The DJIA rose 40.49 points or 0.14% to close at 22,381.20 points

• European stocks headed by banks gained for a 10 week high as President Donald Trump’s plan to fix tax sent hopes for a bet on rising rates, inflation and securities prices in United States. The FTSE, DAX and CAC 40 all rose for the week by 0.2%, 0.9% and .2% respectively

• Japan’s Nikkei share average was up by 3.4% in September as a result of weaker yen contributing 1.4% for the quarter to a total of 6.2% gain in 2017. The Nikkei share average remained solid during the week but was down by 0.3% at 20, 305.04 points on Friday due to month end impact

• The ASX concluded the week on a quiet note with the S&P/ASX 200 index ending flat, at 5,681.60 points. For the month it dropped by 0.8 per cent compared to the previous month. Similarly, the S&P/ASX 50 index finished at 5,628.7 points, down by 0.1 per cent for the week and 0.9% for the month

• PGK/USD remained unchanged for the week to close at 0.3125 while PGK/AUD appreciated by 1.2% to end at 0.3987

• AUD/USD declined by 1.2% to end the week at 0.7839 following proposed changes to both private and corporate tax systems by US president Donald Trump. The suggested tax amendments, if passed, would result in the biggest shift in US taxation for 30 years

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

pdfKFM Weekly Investment Update: Friday, 29th September 2017

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