WA Index

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WA Index

Issue 188 | October 2019

Welcome to the 188th edition of the Deloitte WA Index, a monthly review of Western Australian stocks and indices.

The market capitalisation of the WA index increased 1.7% in September, rising to $187.9bn. The growth of Western Australian companies was primarily driven by share price gains from index leaders Wesfarmers, Woodside Petroleum and Fortescue Metals Group, leading the WA Index to outperform the broader All Ordinaries this month.

Download the list of WA’s top 100 listed companies, as of 30 September 2019, explore the sections below and if you do not 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 Dave Andrews.

As of 30 September 2019

Commodity review

Commodity and Precious Metal Prices
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  • LNG prices increased by 22% to a closing price of US$5.75/mmbtu due to rising demand in Asia, with China expected to overtake Japan as the world’s top importer of LNG. China is forecast to comprise one third of global LNG demand by 2024. LNG imports in Asia, led by Japan, China and South Korea, are projected to exceed expectations again this year as natural gas remains one of the fastest growing fuel sources across the region.
  • Cobalt surged to a six month high during September before finishing the month up 13% at US$36,484/t. The increase stems from shrinking supplies after Glencore, the world’s largest cobalt producer, announced plans to shut down its Mutanda mine in the Democratic Republic of Congo at the end of 2019. This shutdown is expected to eliminate about a fifth of the global cobalt supply. Ongoing cobalt demand in the global transition towards electric vehicles also bolstered prices, with forecasts predicting the demand for cobalt will double by 2025.
  • Iron ore prices increased 8% to US$95/MT at the end of September. Lingering supply shortages and rising demand has contributed to the price increase, with China’s factory activity expanding at its fastest pace in 19 months. The Chinese Central Bank has also vowed to step up efforts to lift the struggling economy, which has boosted confidence in the iron ore market.
  • Zinc increased 6% from US$2,212/MT to US$2,350/MT at 30 September. The increase is partly a result of continuing supply issues. The latest hit comes from Canada’s Teck Resources, which experienced electrical issues at its British Columbia zinc smelter reducing production by approximately 30,000 tonnes. Zinc demand from India for automobiles, electric vehicles and infrastructure projects has also contributed to the price increase during September.
  • Nickel prices have decreased 4% through September to close at USD$17,339/MT. Weaker demand from the stainless steel sector, which accounts for 70% of global nickel consumption, has been a major contributor to the price decline with producers still consuming overstocked stainless steel from early in 2019.
  • Coking Coal fell 12% from US$152.5/MT at the start of the month to close at US$134/MT. The decrease stems from China’s environment ministry setting stricter emission targets to reduce pollution during the upcoming heating season, with several Chinese steel mills ordered to shut or limit operations from 1 October 2019. Coking coal has also been influenced by the ongoing US-China trade war as doubts on whether the two nations will be able to settle their trade conflicts continue.

Performance of WA Index and global indices

Performance of WA Index and global indices
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Global indices displayed positive growth in September, highlighted by a 5.1% growth of the Nikkei. Despite the underlying tension of the US-China trade war, the Nikkei was boosted by a spike in consumer spending as the Japanese Government introduced a 2% consumption tax rise as of the 1 October. The Asian markets were further supported by a weakening of the Yen attracting foreign investment.

The US S&P 500 displayed another volatile month due to numerous political incidents and the ongoing US-China trade conflict, however was able to close 1.7% higher. The growth was supported by the central banks which cut interest rates in early September for the second time this year, as well as news from the Treasury department hinting at possible investment of Chinese firms into the US stock market.

Despite concerns about Britain’s trade tension with the US, the FTSE 100 performed strongly throughout September and finished with a 2.8% gain. The increase was supported by an easing of Brexit negotiations by the UK parliament and talk of interest rate cuts by England policy makers. The FTSE was further boosted by performance of the mining and oil reliant companies after the global hit in petroleum in the Middle East.

Locally, the All Ordinaries grew during September, rising 1.5% on the back of strong performance in the mining and banking sectors.

WA Index movement

Performance of Global Financial Markets over the past 12 months

WA Index movement
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Top performers of the month

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

  • Independence Group market capitalisation increased 18.4% in September and moved from $3,031m to $3,805m. Independence Group’s growth this month has been on the back of strong earnings growth as shareholders were buoyed by the release of FY19 financials and the announcement of a 44% increase in profit after tax for the year and record FY19 dividends.
  • Lynas Corp has continued its growth through September as its market capitalisation grew by 14.1% to $1,884m. During September, Lynas signed an MOU with the city of Kalgoorlie-Boulder, making way for a review of potential sites for its new Cracking and Leaching plant. Lynas also benefited from ongoing geo-political drama between the US and China this month. Being the only major rare earth miner and processor outside China, security of supply concerns stemming out of the US has Lynas well positioned.
  • Gold mining company Saracen Minerals market capitalisation is up 11.4% this month to close at $3,375m. Saracen’s bolt-on strategy has continued its success, highlighted by the recent acquisition of the Sinclair project from Talisman Mining. This delivers a highly prospective gold tenure with extensive infrastructure, 25km from Saracen’s Thunderbox operations.

Major index players in August 2019
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  • Iron ore explorer Brockman Mining grew its market capitalisation by 19% in September to close at $312m. The strong growth was on the back of a resurgence in the price of iron ore which hit highs of $95USD per tonne during September . Further, Chairman Kwai Sze Hoi announced in the FY19 annual report that the company and Joint venture partner Mineral Resources Limited have made significant infrastructure progress towards commencement of production from the flagship Marillana project.
  • Pantoro Limited’s market capitalisation increased 17% in September to finish at $303m. The company acquired a 50% share in the Norseman Gold project via a 100m share issuance in July, and has since announced successful mineralisation results from its maiden drilling campaign. The company expects to benefit from its extensive infrastructure that will be able to minimise costs and facilitate company growth in the coming years.
  • Bellevue Gold has continued its exceptional start to FY20, with an 11% rise in market capitalisation to $373m at the close of September. Bellevue’s drilling programs have proven to be successful, with the announcement of high grade drill results confirming significant gold deposits within the Deacon & Mavis lodes at their historic Bellevue mine. Market capitalisation was further buoyed by the recent $18.5m share placement to fund exploration activity.

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

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 Dave Andrews.

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