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KFM Weekly Investment Update: Friday, 30 October 2015

Local Market Summary:

•PM Hon Peter O’Neill announced in Parliament this week that PNG has about US$2.9b
(K8.0b) in the US Foreign Reserve accounts which is expected to be sufficient to cover
about 9 months of imports. He further confirmed that Kumul Holdings also transferred
about US$100.0m into the PNG Central Bank last week

•Further, the construction phase of the Pacific Marine Industrial Zone project is expected to
be launched on 23 November in Madang. The Trade, Commerce and Industry Minister
Richard Maru noted that work is expected to commence next month. The project is expected
to create 20,000 jobs for the locals and increase the export value of fish processed
in PNG by K2.0b and is expected to be inaugurated by PM Hon Peter O’Neill

•PNG Power acting CEO, John Yanis has confirmed that all hydro electricity generation using
the Sirinumu Dam will cease when the water level drops to 100.0 million cubic metres. Mr
Yanis further confirmed that the current dam capacity is 129.0 million cubic metres and is
expected to last another 8-10 months

•The National Development Bank has paid its first dividend of K1.0m to Kumul Consolidated
Holdings

•Standard & Poor’s (S&P) has issued a revised rating assessment of Bank South Pacific
(BSP). S&P continued to affirm its ‘B+’ long-term and ‘B’ short term ratings outlook on the
bank. At the same time, it had revised its long-term issuer credit rating outlook from stable
to negative. BSP Chairman, Sir Kostas Constantinou, said that the rating does not reflect
any changes to credit factors specific to BSP, which remain broadly unchanged, instead,
the rating action reflects S&P’s view that PNG’s economic resilience is under pressure from
lower global energy prices, which in turn increases the risk within PNG’s banking system

•Barrick Gold Corporation reported a net loss of $US264.0m (K750.2m) for the third quarter
and an adjusted net earnings of $US131.0m (K372.3m). The company, in its recent quarterly
report, stated that production in the third quarter was in line with expecta2ons at 1.7
million ounces of gold

•Newcrest Mining Chairman Peter Hay announced at the company’s AGM held in Australia
that the Board decided not to pay a dividend for the financial year 2015. He said that the
decision was consistent with the company’s current financial parameters, and its dividend
policy which also considers the company’s profitability, balance sheet strength and reinvestment
options

•Woodside Petroleum CEO Peter Coleman remarked this week that the Company’s offer of
US$8.1bn in stock for Oil Search was ‘fully priced’, and anticipates the suasion of Oil Search
Shareholders amidst further declines in the commodities market. The interest in Oil Search
has been seen to support share price in the recent times as investors ‘price in’ the potential for an increased bid

•This week’s BPNG auctions in Treasury Bills were undersubscribed by K104.5m out of the
K200.0m on offer indicating reduced appetite for short term Treasury securities .The
weighted average yield for both 182 days was 4.5% while 364 days was at 7.4%

•This week’s auctions in Central Bank Bills were undersubscribed by K9.0m out of K279.0m
on offer possibly indicative of the market’s preference for attractive yields offered by
longer term securities. The weighted average yields were at 1.3% for 28 days, 2.3% for 63
days and 2.5% for 91 days. KFM expects rates to remain around current levels as supported
by subdued outlook for inflation

•The KSi Index ended the week in positive territory up 2.7% to close at 3,590.6 points supported
by an increase in the price of Oil Search, while the KSi Home Index was 0.1% lower,
caused by a drop in the share price of Kina Asset Management to end at 9,655.4 points

International Market Summary:

•The Dow Jones was up 0.6% to end the week at 17,755.8, followed by the S&P500 up 0.7%,
to 2,089.4 and NASDAQ ending in positive territory up 0.8% to 5,074.3. The US stock market
initially reacted negatively to the Fed statements to keep rates on hold, as expected on
Wednesday; however the losses were slightly regained by the end of the week

•The Nikkei rose 1.4% for the week, jumping 7.7% for the month, the best monthly gain in
two years after market digests Bank of Japan’s decision to keep monetary policy steady

•Australian shares finished lower for the week, with the increased likelihood of a rate cut
from the Reserve Bank next week not enough to offset a sell-off in the consumer staples
sector following a poor sales report from Woolworths. The ASX200 index, after posting
losses in all five sessions, fell 2.1% over the week to close at 5,239.4. The broader All Ordinaries
index closed 1.8% lower for the week to 5,288.6

•Brent crude slipped about 0.4% to US$48.6, up 1.2% for the week and 0.4% for October
after mixed US economic data exacerbated fears of oversupply and as investors took
profits following a rally, but was still on track to end a volatile week with gains (refer
graph)

•PGK/USD closed for the week 0.6% lower at 0.3420 reflecting the continued shortfall in
liquidity while PGK/AUD picked up by 0.9% to close at 0.4808 for the week, caused by a
drop in the AUD against USD, down 1.3% to 0.7124

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pdfKFM Weekly Investment Update: Friday, 30 October 2015

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