Issue 169 | October 2017

Analysis

WA Index

Issue 169 | October 2017

Welcome to the 169th 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 30 September, 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 30 September 2017

Commodity review

Commodity prices experienced a downward trend in September with the exception of crude oil which has finished strong off the back of increased demand and reductions in supply.  China once again was the leading factor driving the market, with pressure being placed on environmental regulation and a slowing, credit stricken economy pointing towards a reduction in consumption.

With the Chinese market accounting for more than 45% of the global demand in copper, the expectation of a slowdown in the Chinese economy has caused copper prices to fall by 4.6% closing the month at US$6,432.25. The looming threats of North Korea tensions, and the downgrading of China’s credit rating from A+ to AA- due to fears over the heavy debt positioned country have further contributed to the retraction.

In contrast to the majority of other commodities, Crude oil has finished strong with an 11.7% increase to US$57.86 per barrel. With demand increasing across the board and supply decreasing, the price has climbed to a 2 year high. Demand has increased with US refineries resuming production post Cyclone Harvey. The main concern for the commodity are sanctions being placed on the Kurdish region.  The Turkish government has threatened to cut crude oil flows from Iraq’s Kurdistan region in the wake of the Kurdish independence referendum. Such a cut would see supply disruption as the pipeline usually pumps approximately 500,000 to 600,000 barrels per day.

Nickel performed poorly in September falling from $11,520.00 to $10,415.50 (-9.6%) due to a fall in demand from the Chinese market. Environmental inspections throughout China have seen many mills close, affecting the production of stainless steel and ultimately resulting in a decreased demand for Nickel. 

Iron ore has been hit hard with prices tumbling by 20.1% closing at $62.30 per tonne. The decrease is a result of demand concerns amid the Chinese government’s crackdown on air pollution levels caused by steel production, with some producers in China having to cut production significantly ahead of winter.  The supply side of the equation is also concerning with inventories increasing.

Finally, coking coal has fallen 13.2% from $189.00 to $164.00 per tonne. Similar to the aforementioned commodities, the fall is attributable to weaker demand, with Chinese steel production slowing. Stockpiles of cocking coal at steel mills in China have recently increased by 100,000 tonnes to 15.96 million tonnes further creating concerns over supply

Commodity and Precious Metal Prices

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Select above image to enhance the Commodity and Precious Metal Prices

WA Index movement

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Select above image to enhance the WA Index movement

Performance of WA Index and global indices

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

The Deloitte WA Index fell slightly during September as the market capitalisation of Western Australian listed companies decreased by 0.5% to close the month at AU$162.1bn.

Deloitte Clients & Markets Partner - Western Australia, Tim Richards, said the dip last month came from the Index trending with the movement in the All Ordinaries Index.

“Commodity prices broadly weakened over the month, with the threat of slowdown to the Chinese economy. However, macro factors aside, several WA Index players still enjoyed share price growth during September, following encouraging operational results and some strategic agreements being announced.”

Among the major Index players in September:

  • South32 Limited regained its position as 3rd within the WA Index based on market capitalisation off the back of an AU$1.76bn (12%) gain during the month. The release of year ended 30 June 2017 results boosted investor confidence as the Company boasted revenue growth of 18% and profit of $1.80bn
  • A landmark lithium offtake deal signed with Chinese car manufacturer Great Wall Motors has propelled the market capitalisation for Pilbara Minerals by AU$436m (79%). The deal fortifies the Stage 2 expansion of its Pilgangoora Lithium Project, as the Chinese car manufacturer intends to produce 500,000 electric and hybrid cars per annum by the early 2020s
  • With the price of Tungsten rising - 50% over the past two months and as one of the most actively traded stocks on the ASX during September, the rare earth metals producer Lynas Corporation received a market capitalisation boost, increasing by AU$304m (42%)
  • Galaxy Resources released positive assay results from its drilling campaign at its James Bay Project in Canada, which drove market capitalisation up by AU$298m (39%). The now complete 33km diamond drilling campaign was undertaken in order to extend and develop its existing James Bay spodumene resource, and reaffirms the potential of James Bay as a long-life, high-grade spodumene project.

The equity markets surveyed posted mixed results during September:

  • The All Ordinaries slipped 0.5% to 5,745 points at 30 September, with weak trading volumes being the overriding factor in a mixed month for the major players in the mining, energy and financial sectors. The final week of September was one of the quietest for the year, as a result of school holidays and a selection of state public holidays
  • An all-time high was reached by the US S&P 500 as it ended its eighth consecutive quarter of growth, up by 1.9% for the month. The index was boosted during September by the Federal Reserve’s hawkish comments regarding monetary policy, as well as an announcement of the Trump administration’s long-awaited tax reform package
  • September was a turbulent month for the FTSE 100, losing 250 points in the first fortnight, before clawing back ground to close 0.8% lower than the start of the month on 7,373 points. Two conflicting drivers were responsible for the fall, with revised annual growth for the UK (from 1.7% to 1.5%) weighing the index down despite a weaker pound sterling placing upward pressure on the FTSE
  • The Nikkei recorded its best month for 2017 in September, with a weak yen allowing the index to reach a two-year high during the month. Strong earnings and positive risk sentiment continued to outweigh Japan’s geopolitical concerns, in particular the escalation of tensions between North Korea and the US.

 

LED board

Top performers of the month

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

Top performers of the month

Top performers of the month

Top performers of the month

Top performers of the month

Top Performers of the month
Top performers of the month
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Select above image to enhance the Top performers of the month

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

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

  • Argosy Minerals has made its second consecutive monthly appearance within Movers and Shakers, with market capitalisation rocketing by AU$128m (106.7%), more than doubling its share price during the month. The lithium explorer’s Rincon Lithium Project in Argentina continued to progress, with positive announcements throughout the month relating to the status of stage 2 development works with Argosy on track to become a strong lithium producer
  • Wolf Minerals’ market capitalisation increased by AU$38m (63.6%) during the month. Bolstered by concerns of supply reductions in China, the price of tungsten rose to a 2017 high of US$300/mtu in September. The strength of the tungsten price, as well as improved performance at their Drakelands tungsten mine in England, led to its share price climbing from 5.5c to 9.0c
  • Sheffield Resources’ market capitalisation for the month increased by AU$42m (55.4%), as the market responded favourably to an agreement secured with Ruby Ceramics for an initial three-year period, with annual contract extensions to follow. The Indian ceramics company will purchase 6,000 tonnes of premium zircon annually from Sheffield’s Thunderbird mineral sands project in Western Australia.
Elevator Reflection

WA Index Feature Articles

2017-18 Western Australian Budget Briefing Note

The new State Treasurer, Ben Wyatt, handed down his first Budget on 7 September 2017. Few WA Treasurers have inherited a worse set of books. The new State Government has had to make a number of difficult decisions to continue the process of repairing the WA State Budget.

Download the full report.

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.

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