western australia wa stock exchange index

Analysis

WA Index

Issue 146 | June 2015

Welcome to the 146th edition of the Deloitte WA Index, a monthly review of Western Australian stocks and indices.

With this edition we introduce a new look and experience. Download the list of WA’s top 100 listed companies, as of 31 May 2015, 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 Adrian Kelly.

As of 31 May 2015

Commodity review

Base metals were not in vogue this month with the threat of rising stockpiles and falling demand dampening prices. Precious metal prices remained relatively stable, largely on the back of mixed news, with positive US economic data being offset by the continuing uncertainty about Greece’s position within the Eurozone. Crude oil posted a small decrease driven largely by increased supply, and iron ore experienced a gain for the second month in a row, much to the relief of the WA based producers.

All the base metals felt the pinch this month with aluminium, nickel, lead and zinc decreasing by 12.0%, 9.5%, 8.9% and 7.8% respectively. Aluminium led the charge with its price retreating to US$1,700.50/tonne, its largest monthly fall since October 2012, driven largely by fears of increased Chinese supply raising questions around longer term demand and supply for the metal.

Copper and nickel had a tumultuous month with China posting its lowest economic growth rate in 24 years accompanied by the plethora of supply driving prices down. Nickel couldn’t shrug off this price drop which diminished investors’ hopes of a resurgence following predictions of supply shortages due to the Indonesian export ban last year.  Copper prices continues to fall ending the month down 5.6% at US$6,005.25 due to the fall in Chinese demand and an increase in supply despite strong housing data released by the US which somewhat bolstered the outlook for the commodity.

Zinc prices have rallied over the past year with many analysts pointing out that the metal was in short supply, citing mine closures and falling stockpiles. However this notion was mostly extinguished this month with prices plunging by 7.8% to US$2,182/tonne. The fall has been triggered by China, who continue to increase production in combination with a drop in demand as construction slows. 

Commodities

Commodity prices


U.S. economic data also included higher business spending and consumer confidence results which usually negatively impacts gold prices with the precious metal often seen as a safe haven asset. Yet, this did not occur this month with Gold ending the month with a 0.8% increase given continued concerns of Greece’s ability to service its debts, and therefore remain in the euro zone. Silver and palladium followed suit with increases of 4.4% and 0.5% respectively. Platinum was the only precious metal to decline with prices falling by 1.8%. The third biggest producer of platinum, Britain’s Lonmin Plc, cut forecast capital expenditure during the month anticipating stagnant platinum prices for the next two years.

Crude oil prices ended the month down 0.8% at US$64.26/bbl. During the period there was a fall in the number of operational US oil rigs suggesting a decline in future production. However, weekly oil production increased three times during the month, implying that output from operational rigs increased with costly rigs shutting down.  Increasing production efficiency and a potential oversupply could see oil prices persisting at these low levels.

Iron ore has backed up a solid 9.4% increase in April with a 1.7% increase in May ending the month at US$59.00 per tonne. With the low prices experienced recently, many middle tier producers have been unprofitable leading to supply being scaled back. Additionally Rio Tinto also experienced disruptions in April at their port loading operations in WA all of which has resulted in the contraction in stockpiles, especially in China. However, these price increases may soon be offset by the new Chinese iron ore deal with Brazil’s Vale S.A. In addition, not all of Australia’s major miners have reduced their production output.

Lastly, uranium experienced a poor month with an 8.5% drop in prices driven by the news that Tokyo Electric Power Co., was looking to reduce its stockpiles to reduce costs amid uncertainty around the restart of idled nuclear plants, therefore depressing prices

Performance of WA Index and global indices
 

WA Index movement

Top performers of the month

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

 

South32 Limited (South32) listed during May, closing the month with a market capitalisation of AU$11.7bn. South32 are ranked 3rd in the WA Index as at 31 May 2015. South32 demerged from BHP and is a globally diversified metals and mining company with a portfolio of assets producing bauxite, alumina, aluminium, thermal and metallurgical coal, manganese, nickel, silver, lead and zinc.  Its head office is in Perth, with operations in Australia, Southern Africa, and South America.  With a global portfolio of high quality assets it is now the third biggest miner in Australia.

Australian Finance Group Ltd (AFG) listed during May, closing the month with a market capitalisation of AU$251m. AFG are ranked 38th as at 31 May 2015. AFG is Australia’s largest mortgage broking group. Strong demand in the domestic mortgage market, coupled with support from both domestic and international institutional and retail investors has helped to drive AFG’s recent success.

Coal of Africa Limited (CoAL) increased its market capitalisation by 114.3% from AU$78m to AU$168m over the month. This resulted in CoAL being ranked 55th position as at 31 May 2015. CoAL’s business centres on exploration, development and mining of its various coal interests located in South Africa. CoAL completed Stage 3 of its capital raising during the month issuing 144 million shares at an issue price of GBP0.055, and was also granted a New Order Mining Right for its Makhado coal project by the South African Department of Mineral Resources.

western australia stock index

2015-16 WA Budget Briefing

In announcing the State’s first operating deficit in 15 years of $1.3bn in 2014-15 (further deteriorating to $2.7bn in 2015-16), the WA Government has undertaken some steps forward through a range of expenditure and revenue measures. However, now is not the time for complacency. The WA Government must formulate a broader public sector reform agenda to avoid further pain.

2015-16 WA Budget Briefing

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 Adrian Kelly.

Did you find this useful?