Issue 153 | March 2016

Analysis

WA Index

Issue 153 | March 2016

Welcome to the 153rd edition of the Deloitte WA Index, a monthly review of Western Australian stocks and indices.

Download the list of WA’s top 100 listed companies, as of 29th February, explore the sections below and if you don’t currently receive our WA Index, please register to be added to our distribution list.

Highlights

If you have any questions in relation to the Deloitte WA Index please contact Angela McIlroy.

As of 29 February 2016

Commodity review

Iron ore had an impressive month increasing by 15.4% to US$49.40 per tonne, as Chinese steel mills restock after the Chinese Lunar New Year. With every US$1 increase in the price of iron ore said to result in a boost of $300m in Australian tax revenue, Treasurer Scott Morrison is hopeful the gains are here to stay. However, many analysts are not as optimistic, pointing to short term seasonal factors masking the harsh truth that supply is expected to exceed demand for the foreseeable future.

For precious metals, gold had a good month increasing by 10.4% to US$1,223 per ounce on the back of continued volatility in global equity markets, yet some commentators suggest this recent rally is unstainable as the global economy fears look overdone in light of ongoing job growth and optimism for the US economy.

Platinum increased by 6.7% to US$924 per ounce, benefitting from strong car sales figures in Europe, up 6% in January over the prior year, however this news failed to boost palladium which has continued its 2016 losing streak.

Zinc performed admirably during February, increasing 8.0% to US$1,759 per tonne, with investors worried about possible shortages going forward. These worries, fuelled by the January closures of MMG Limited’s Century mine in Queensland and Vedanta Resources Lisheen mine in Ireland, are expected to push zinc higher in the coming months.

Tin was another strong performer, increasing by 7.2% to US$15,976 per tonne, buoyed by the impact of the Indonesian governments export restrictions, with January exports down 63.0% on the same month last year, as well as flooding on the island of Bangka, an area of high tin production. Also, in the news out of Indonesia this month was the planned closure of tin smelter PT Refined Bangka Tin (RBT). Taking all these different factors into consideration, it looks as if tin could be in for a bullish few months, however news that production in Myanmar has increased significantly lately may put a dampener on things.

Oil rallied this month increasing 5.2% to finish at US$36.31 per barrel, with conflicting news coming out of Saudi Arabia and Iran. Prices fell in the first half of the month with Iran’s announcement that it is planning to ramp up production by 1 million barrels per day following the lifting of its oil sanctions. However Oil prices received a boost following meetings between Russia, Saudi Arabia, Venezuela, and Qatar, who are attempting to broker a freeze in crude oil production at January 2016 levels amongst oil exporting nations.

Uranium was February’s worst performer, down 3.6%, following the announcement by Tokyo Electric Power Co (TEPCO) it will take up to 40 years to clean up the site of the 2011 Fukishima nuclear disaster.

Select above image to enhance the Commodity and Precious Metal Prices
Select above image to enhance the Commodity and Precious Metal Prices

Performance of WA Index and global indices

Select above image to enhance the Performance of WA Index and global indices
Select above image to enhance the Performance of WA Index and global indices

WA Index movement

Select above image to enhance the WA Index movement
Select above image to enhance the WA Index movement

The Deloitte WA Index fell during February, with the market capitalisation of Western Australian listed companies decreasing by 1.1% and closing the month at AU$118.0bn.

Among major Index players:

  • Mineral Resources Limited’s market capitalisation rose by AU$383m (55.3%) during the month following the release of strong half-year results and the announcement of an increased dividend
  • Saracen Mineral Holdings Limited’s market capitalisation increased by AU$202m (35.4%) as a result of the rising gold price and increased production following the first gold pour at its Thunderbox project mid-February
  • Northern Star Resources Limited’s market capitalisation grew by AU$565m (31.8%) following a strong result for the first half of FY16, as well as an increased dividend. Investors are also factoring in forecast strong financial performance based on management’s production guidance of 700,000 ounces a year over the next two years.

All equity markets surveyed slumped during January:

  • The All Ordinaries fell 2.2%. The big four banks took the biggest hit, collectively wiping AU$35.6bn from the market.  Investors also grew anxious over dividend cuts alongside the RBA’s decision to keep the cash rate on hold
  • The FTSE 100 rose by 3.1% again largely impacted by expectations of monetary easing which motivated traders to purchase commodity stocks. The market was also bolstered with investors turning their attention to the G20 summit in Shanghai with global growth expected to be on the top of the agenda
  • The S&P 500 decreased by 0.4%, with banks and health care stocks fronting the retreat. Poor manufacturing data and uncertain expectations surrounding the upcoming Federal Reserve meeting in March dissolved February gains
  • The Nikkei continued to slide, decreasing by 4.1% with a combination of a strong Yen and weak investor sentiment continuing to plague Japan’s manufacturing sector.                                                                                                                                                                                                                                                                                                                                               Back to top
LED board

Top performers of the month

The top Deloitte WA Index Movers and Shakers in February included:

  • 88 Energy Limited (88E) posted a 584% increase in market capitalisation from AU$18m to AU$127m. This follows the release of a positive evaluation update from its Icewine #1 well in Alaska indicating a wealth of resources consistent with the company’s expectation
  • Millennium Minerals Limited (MOY)  posted a 176% increase in market capitalisation from AU$36m to AU$100m. The company’s share price increased due to the higher gold price, coupled with the final loan repayment which was ahead of schedule and left the company debt-free
  • Dacian Gold Limited (DCN) posted a 101% increase in market capitalisation from AU$104m to AU$209m. The increase in market capitalisation followed positive results from drilling activity, which continues at its Mt Morgans near Laverton, WA.

Western Australian top performers over the past month by growth in market capitalisation

Select above image to enhance the Top performers of the month
Select above image to enhance the Top performers of the month
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If you have any questions in relation to the Deloitte WA Index please contact Angela McIlroy.

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