Issue 162 | January 2017

Analysis

WA Index

Issue 162 | January 2017

Welcome to the 162nd 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 31 January, 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 31 January 2017

Commodity review

Commodity prices returned a mixed performance for the month of January. Strong results from the precious metals complex of gold, silver, palladium and platinum, with a more muted increase for copper, iron ore and aluminium. Meanwhile, coal retreated negatively this month following its recent strong rally.

Gold’s safe haven status was in demand during January as President Trump’s trade and foreign policies came up in lights. The new US administration sought to jawbone the USD lower, which prompted an offsetting rise in the gold price, increasing 4.7% during the month. Decreased confidence in the certainty of US interest rate rises and the reduction in the perceived opportunity cost of holding gold also bolstered the price.

The Chinese Government sought to relieve the pressure on coking and thermal coal prices by partially reversing the restriction on local coal mine operating days. With production constraints lessened, speculators exited positions. Coking coal decreased by 6.8% landing at a final price of US$179.00 per tonne.

Iron ore has managed to hold onto gains from late 2016 and posted an additional rise in January of 3.7% to US$83.50 per tonne. Whilst inventory and supply fundamentals appear at odds with this outcome, a rising steel price in China has seen the bulk commodity holding its ground. The promise of large scale US infrastructure projects is also supportive of current prices.

Rising inventory levels and uncertainty on how US shale-oil production would respond to OPEC’s decision to restrict supply, led to a moderation in recent crude oil price strength. The price retreated to US$55.39 per barrel dropping by 2.3%.

Uranium has bounced off its 12 year low in December 2016 mainly as a result of supply reductions in Kazakhstan and Australia though market watchers believe future prices will be capped, as a balanced market is not expected until 2020.The commodity posted a worthy 13.6% increase during the month.

Copper and aluminium continued to benefit from improved Chinese demand and large scale US infrastructure promises. Production cuts for both metals in China are also supportive of price rises as is declining copper ore grades in Chile. Both copper and aluminium posted healthy price increases of 5.2% and 5.4% respectively. 

Finally nickel prices were under pressure during the month as the Indonesian Government lifted its ban on the export of unprocessed ore, which had been in place since 2014. The commodity dropped to US$9,622.50 per tonne (3.4%) after the predicted increase in supply and recommenced shipments. Nevertheless, with the Philippines just announcing its shutting-down of approximately 10% of world nickel supply on grounds of environmental degradation, there’s more nickel price volatility to come.

Commodity and Precious Metal Prices

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 strengthened during the month of January as the market capitalisation of Western Australian listed companies increased by 1.64% to close at AU$161.3bn.

Deloitte Clients & Markets Partner - Western Australia, Tim Richards, said the WA Index posted its third consecutive month of gains in January. Resource stocks strengthened with continued growth in iron ore prices sparking strong trade in key iron ore miners such as Fortescue Metals Group. The growth in resource stocks was partially offset by investor uncertainty surrounding the early days of Donald Trump’s US presidency, including the controversial immigration policy.

Among the major movers in January:

  • Fortescue Metals Group Limited’s market capitalisation rose by AU$2.4m (13.1%) off the back of rising iron ore prices. The company has had a strong last quarter after its commitment to cost cutting and debt repayment. This was further reflected in Moody upgrading Fortescue’s corporate rating to Ba1
  • Galaxy Resources Limited’s market capitalisation rose by AU$172.0m (17.8%) after completing its first shipment of lithium concentrate from the recommissioned Mt Cattlin Project.  This is a significant milestone for the company which has expected production of 160 thousand tonnes for the current year in 2017
  • Sandfire Resources NL announced its intention to repay AU$50m on its DeGrussa Finance Facility 12 months ahead of schedule.  Recent improvements in copper prices coupled with a strong cash position allowed for the large debt repayment which bolstered Sandfire’s market capitalisation, having grown AU$148.5m (16.7%) during the last month.

All but one of the equity markets surveyed weakened slightly during the month of January:

  • The All Ordinaries remained steady, falling by -0.8%. The market was strengthened by surging bank and resources stocks which ultimately benefited from rising commodity prices evident in iron ore, gold, aluminium and uranium. This growth however was outweighed by concerns over the potential economic impact of US President Donald Trump’s immigration policy
  • The S&P 500 gained during January, posting a 1.8% increase. Historical trends show the S&P 500 typically strengthens after the inauguration of a new US president ; January’s success was most evident in mining, energy and financial stocks
  • The FTSE 100 followed the All Ordinaries, weakening by -0.6% in January. Similarly, the index suffered from President Donald Trump’s recent immigration policy which has begun to suppress investor enthusiasm.  Recent job reports within the US however have implied optimism for the American economy within the next year, offsetting this decrease along with the weakened pound
  • The Nikkei posted a small loss this month, with a slight decline of -0.4% after fears regarding the impact of US President Donald Trumps’ future economic policies which would drive a stronger yen. Claims have been made by Trump suggesting that China and Japan have been gaining advantage on US trade policies through currency devaluations.
LED board

Top performers of the month

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

Top Deloitte WA Index Movers and Shakers in January included:

  • Atlas Iron Limited’s market capitalisation rose by AU$155.6m (63.0%) during January, largely thanks to the repayment of AU$54m in debt which cut their US term loan debt down to AU$118m. The substantial debt repayment is a reflection of the strengthening iron ore price, offset in part by the impact of the lower Australian dollar on the balance of US dollar denominated debt
  • Blackham Resources Limited’s market capitalisation soared AU$87.2m (67.8%) on the announced exploration success at the Wiluna Gold Operation. This highlighted resource upgrades providing an additional 1.5 million metric tonnes per annum crushing and grinding circuit to process Wiluna Ores. The announcement promoted a 25% total resource increase since the last quarter
  • Greenland Minerals and Energy Limited recently formed a strategic relationship with a subsidiary of Shenghe Resources Holdings Co Ltd. The relationship aims to develop the Kvanefjeld rare earth and uranium project in Greenland which contains 11.1 million tonnes of rare earth oxide and 593 million pounds of uranium.  During January, the company posted a massive 117.4% increase in market capitalisation from AU$68.9m to AU$149.9m.
Elevator Reflection

If you don’t currently receive our WA Index, you can register to be added to our distribution list.

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

  • Contact us
  • Submit RFP
  • Our Solutions

    Progress your business growth and development

    Take a look at the products and services we offer.

    Financial reporting

    Deloitte has extensive experience in assisting firms of all sizes deal with the governance and compliance issues raised by IFRS to achieve best practice.

    Financial Services

    Our Australian financial services team of more than 500 practitioners has extensive experience in the banking and securities, insurance and wealth management sectors.

    Accounting

    Deloitte Private has immense experience and deep knowledge in regulatory and financial reporting, account preparation, technical advice and accounting system reviews.

Did you find this useful?