Commodities stable but LNG weak: a monthly review of Papua New Guinea’s commodities and financial markets

Commodity prices were reasonably stable over the month and precious metals strengthened. But the weakness in Liquefied Natural Gas (LNG) prices continued. Business Advantage PNG’s monthly review of Papua New Guinea commodity and financial markets.

The Kina against the US$, A$, Trade Weighted Index and Real Effective Exchange Rate. Source: Bank of PNG

According to Kina Securities, the LNG price continued to ease, falling by 8.1 per cent over the month. It is now down 18.6 per cent over the year and is trading at about the same level as early 2009, according to InvestmentMine. The LNG price is only about a quarter of its peak in July 2008, however, and still well below its 2014 highs.

The oil price strengthened slightly. West Texas Intermediate was up 2.4 per cent for the month and is down only 6.9 per cent for the year. Oil is trading 73 per cent higher than its January, 2016, low point.

‘Gold is up 1.3 per cent for the month.’

Volumes are expected to remain strong. According to the Bank of PNG’s latest quarterly Monetary Policy Statement, the bank is projecting a current account surplus of K13.03 billion for this year, ‘mainly due to an improvement in international commodity prices, ongoing LNG exports and higher production of some other export commodities.’

Precious metals

Precious metals remain strong. Gold is up 1.3 per cent for the month and 10.4 per cent over the year, according to Kina Securities. Gold remains 27 per cent below its September, 2011 peak, however.

The silver price also rose. It was up 3.3 per cent over the month and is up 8.8 per cent for the year.

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‘Palm oil prices began to recover, rising 3.5 per cent for the month.’

Copper however, continued to be weak. It fell 3.4 per cent over the month. Over the year, it is up 2.6 per cent.

Agriculture

Palm Oil prices over the last six months. Source: Index Mundi

Agriculture prices were mostly stronger. Palm oil prices began to recover, rising 3.5 per cent for the month. But it is still down 13.4 per cent over the year.

The cocoa price continued to be volatile, rising 5.5 per cent over the month. It is down 10.1 per cent for the year.

Coffee prices remained weak. They were down by 5.6 per cent over the month and are 5.3 per cent lower than the same time last year. They fell 1.8 per cent for the month and are down 4.3 per cent for the year.

Equities and currency

Dual-listed stocks did not perform well on the Port Moresby Stock Exchange (POMSoX). The KSI Index (which includes dual-listed stocks) fell 4.2 per cent per cent for the month and is up 1.4 per cent for the year.

‘The Kina has moved sideways.’

The KSI Home Index (PNG-listed stocks only) fared better. It rose by 0.2 per cent over the month and is up 4.5 per cent for the year, reports Kina.

The Australian All Ordinaries Index performed similarly to the KSI Index, falling 3.8 per cent over the month, while America’s S&P 500 was up by 1.2 per cent.

The kina has moved sideways. It was stable against the US dollar over the last month and up 0.6 per cent against the Australian dollar. The Bank of PNG said that the Trade Weighted Index (TWI) decreased by 1.7 per cent over the three months to March 15 2017. The TWI is an index showing the value of a country’s currency in relation to the currencies of the countries with which it trades. It is designed to show what a currency should really be ‘worth’ in trade and is used to provide a comparison with the actual level of the currency.

The bank said the Real Effective Exchange Rate (REER), which is a measure similar to the TWI but is adjusted to take account for inflation, appreciated by 3.4 per cent in the December quarter of 2016, compared to the September quarter. The Bank of PNG says this indicates ‘the appreciation of kina against most major currencies.’

Half-year Treasury Bills are unchanged at 4.73 per cent, while full-year Bills are 7.88 per cent. Inscribed stock for 2018–2020 has an interest yield of 9.41 per cent.

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