KFM Weekly Investment Update: Friday, 30 September 2016

Local Market Summary

• Bank of Papua New Guinea (BPNG) stated in their Monetary Policy Statement that, the continued rout in commodity prices year to date resulted in lower FX inflows and subsequently lowers Government revenue. Consequently, the GDP growth forecast was revised downward to 2.2% from previously higher forecast of 4.3%. Notably, the Q2 2016 saw an increase in FX inflows helped by the mining and agriculture sector which relieved some of the backlog in import orders combined with government external loan to further assist the FX market. Accordingly, Foreign Reserves are expected to be US$1.7m (K5.5m) at the end of 2016

• The annual headline inflation continued on an upward trend to 6.8% in June quarter, largely attributed to the increase in prices of seasonal items in the CPI basket. For 2016, the Central Bank projected the headline inflation to be 7.0%, mainly due to volatile movements in prices of seasonal items and the effects of depreciation of Kina

• Kumul Petroleum Holdings Limited MD Wapu Sonk confirmed that the Government further extended the deadline for the acquisition by landowners of the Kroton Equity to December 31, 2016. Cabinet on June 6, 2016 approved the plans to sell
down 4.27% of its equity, in accordance with the Kokopo Umbrella Benefit Sharing Agreement which allowed representatives appointed by beneficiary groups to immediately commence due diligence assessment on the purchase proposal

• Trukai Industries CEO, Greg Worthington – Eyre announced that Trukai plans to grow rice in the country instead of just packaging it. He confirmed that Trukai already had rice trial farms set up in the country with experiments on different rice
varieties being done to establish which varieties were most suitable to grow locally on a commercial scale. He further stated that the plan would take time and resources to achieve but it was something the company wanted

• State-owned entity PNG Power announced a K63.0m profit for 2015 despite enormous challenges. Chairman Mr Andrew Ogil attributed the success to the efforts of employees and the previous board and management and confirmed that the money would be reinvested into the ageing equipment

• Steamships Trading Company Limited notified its non-PNG shareholders that the interim dividend payment of 2016 will not be effected on 30 September 2016 as a result of foreign currency shortage. It is anticipated that payment will be effected by
October 10, 2016 on current conversion availability

• InterOil Corporation announced that a final order from the Supreme Court of Yukon was required to close the transaction with Exxon Mobil. The hearing was held on September 27, 2016 with the court considering the matter, including an objection
filed by Phil Mulacek. Both InterOil Corporation and Exxon Mobil intend to close the transaction promptly after the final order is obtained

• According to Bougainville Copper Limited (BCL) Chairman Rob Burns, BCL and Rio Tinto executed a deed to terminate the Rio management agreement effective from September 12, 2016. He said BCL was now an independently managed PNG company

• This week’s BPNG auctions in Central Banks Bills were offered for 28 days only with an under-subscription of K40.0m out of a total of K450.0m on offer. The weighted average yields was 1.16%

• Auctions in Treasury Bills were over-subscribed by K53.9m from a total offer amount of K265.0m. Weighted average yields were 1.22% for 28 days, 2.40% for 63 days, 2.62% for 91 days, 4.72% for 182 days and 7.71% for 364 days

• The KSi Index rose 0.2% for the week to close at 4,769.82 points while the KSi Home Index was up by 1.6% to end at 10,746.31 supported by an increase in Bank South Pacific up by 1.6% to end at K9.10

International Market Summary

• US economic growth was less sluggish than previously thought in the second quarter as exports grew more than imports and businesses raised their investments. Gross domestic products expanded at 1.4% up from 1.1% reported last month

• European shares climbed higher in early trading on Thursday, with energy shares rallying after oil prices surged overnight after OPEC struck a deal to limit crude output

• The Nikkei ended down 1.5% or 243.87 points, at 16,449.84, down 1.8% for the week and 2.6% for September. But it was still up 5.6% for the July-September quarter

• ASX shares are poised to fall as Deutsche Bank continues to roil the global financial sector. ASX equities erased gains after an internal bank document showed that some funds that use the German lender’s prime brokerage service have moved part of their listed derivatives holdings to other firms this week. Deutsche Bank’s shares traded in the US tumbled to a record low. US Treasuries reversed losses as traders sought haven assets, while the US dollar rose against most of its major counterparts

• PGK/USD remained unchanged for the week to end at 0.3155, PGK/AUD was up by 0.4% to close at 0.4146 caused by a depreciation in the AUD/USD down by 0.2% to close at 0.7627

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pdfKFM Weekly Investment Update: Friday, 30 September 2016

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