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KFM Weekly Investment Update: Thursday, 29 March 2018

Local Market Summary:

● Moody’s has changed their outlook on the PNG Government issuer rating to negative where the previous rating was stable. They have affirmed the B2 rating. The downgrade in rating is attributed to growing risk in terms of liquidity due to high debt levels and cash crisis currently being observed. As the Government’s funds position remains under pressure and pushes them into further debt, this increases their refinancing risks.

● Deputy Prime Minister (PM) and Treasurer Hon. Charles Abel gave key physical targets for the 2018 budget. Total revenue and grants budget is projected at K12.7b, an increase of 16.0% from last year’s revenue and total expenditure and net lending is set at K14.7b, an increase of 14.5% from last year’s. The target 2018 budget deficit of K2.0b is equivalent to 2.5% of GDP, the same ratio as projected for this year. The debt stock at the end of 2018 is projected to reach K25.8b which is 32.2% of GDP

● According to the Deputy PM Charles Abel, K200.0m has been set aside by the PNG Government to provide land and housing to its citizens. Minister Abel confirmed that there will be an additional K200.0m to be provided to BSP and other banks who are willing to participate in the government’s home ownership scheme with BSP to fund first home owners program.

● NASFUND Contributors Savings and Loans Society (NCSL) announced a K2.1m profit and interest crediting rate of 4.3%. The Board of NCSL considered and accepted the audited financial accounts for the 2017 financial year. The results were announced by the Board Chairman Mr Ian Tarutia

● Foreigners and Papua New Guineans living within and abroad the country can now transferring money conveniently. The partnership between Western Union, Post PNG and Bank South Pacific in launching the Western Union’s International Money remittance service is now more convenient and faster.

● Air Niugini’s Chief Executive Officer Mr Simon Foo announced his retirement after more than 40 years with the national carrier. Mr Foo said the airline had a critical role following Jacksons Airport as the regional hub and what the Government wants to do, he is hoping that Air Nuigini becomes a better shareholder and be privatised so the airline runs as a full business.

● Kina Asset Management (KAML) has recorded an investment gain of 16.8% for the year ending December 31, 2017. The total value of the fund increased by K6.2m after allowing for the beneficial impact of a depreciating Kina against the Australian dollar over the year. KAML chairman Sir Rabbie Namaliu said that in local currency term gains were achieved across a number of areas of the KAML investment portfolio.

● This week’s BPNG auction result in Central Bank Bills offered for 28 days was under-subscribed by K14.70m out of the total amount of K491.20m on offered. This indicates that there was a decrease in appetite for shorter dated securities. The weighted average yield for 28 days remained unchanged at 1.40% from the previous auction week

● This week’s BPNG auction results in Treasury Bills were over-subscribed by K297.55m out of a total amount of K336.14m on offer. This indicates that there was an increase in appetite for longer dated securities. Weighted average yields for 63 days, 91 days, 182 days, 273 days and 364 days remained unchanged at 2.37%, 2.42%, 4.72%, 6.76% and 8.04% respectively from the previous auction

● KSi Index decreased by 7.1% to close at 5,142.40 points due to drop in share prices of OSH and NCM by 0.1% and 12.6% respectively while the KSi Home Index remained unchanged to close at 10,910.71 to end the week.

International Market Summary:

● One of ExxonMobil’s long-term buyers, Taiwan’s state-owned CPC Corp, is seeking LNG cargo for delivery in May following news of the earthquake that hit in the Highlands region in late February. Exxon’s PNG LNG project has had to shut down temporarily since the earthquake caused Exxon to declare a ‘force majeure’

● US stocks slipped for the week as investors sold out of tech stocks as one of the major tech stocks, Facebook comes under fire after it was revealed that there was a breach in user privacy when user data was shared with a consulting firm connected to President Trump. Dow Jones Industrial was down 0.5%, S&P 500 was down 1.5% and the NASDAQ was down 3.0% for the week.

● Asian stocks were also affected following the downward trend seen in US stock market as major tech stocks such as Samsung and Sony took hits over the week. The Nikkei was down 2.0%, Shanghai Composite was down 3.3% and the Hang Seng index was down 3.0% for the week.

● Oil prices ended the week on a positive note as markets observe the OPEC-led agreement to curb production output levels with potential to extend the agreement throughout this year and maybe 2019. Brent crude oil was up 1.4% and Light crude oil was up 0.7% for the week

● PGK/USD remained unchanged for the week to close at 0.3075 while PGK/AUD appreciated by 0.04% to end at 0.4008. This was driven mainly by the crosscurrency effect of the USD weakening against major currencies

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

pdfKFM Weekly Investment Update: Thursday, 29 of March 2018

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