Commodities rebounding has been saved
Deloitte WA Index
10 May 2016: The Deloitte WA Index rose during the month of April, with the market capitalisation of Western Australian listed companies increasing by a significant 9.0%, to close the month at AU$136.2bn.
Deloitte Clients & Markets Partner Western Australia, Tim Richards, said the Index’s performance was boosted by strong commodity prices in April.
“April’s result, which follows a 5.9% rise in March, was primarily driven by crude oil reaching its highest price in 2016 and iron ore climbing to US$64.50 per tonne at the end of the month,” he said.
“This spurred on investors, as demonstrated by the market capitalisation of resource heavyweights Fortescue Metals Group Limited, South32 Limited, and Woodside Petroleum which increased by 33.7%, 13.3% and 11.6% respectively.”
This month’s performance continues an upward trend seen over the past 3, 6 and 12 month periods, with the average over the past year now standing at 4%.
Significant Index movements in April included:
- Fortescue Metals Group Limited’s market capitalisation increased by AU$2.7bn (33.7%), with investors responding favourably to ongoing cost reductions alongside stronger iron ore prices during the month
- Resolute Mining Limited’s market capitalisation increased by AU$280m (80.6%) following the announcement of strong cash and bullion positions totalling $90m, and the company achieving a positive net cash/bullion/debt balance of $19m at 31 March, compared to a negative $22m at the start of the quarter
- Pilbara Minerals Limited’s market capitalisation grew by AU$219m (59.0%), following strong interest for its AU$80m equity raising in order to fast track the development of its Pilgangoora Lithium-Tantalum project. Twelve months ago, the company’s share price was trading at 3.5 cents and is now currently sitting at 63 cents per share.
Key commodities surveyed during April included:
- Crude oil which saw the biggest increase for the month, rising by 19.1%, to close at US$47.59 per barrel. Oil prices continued to rally to their highest level since November, on the back of the depreciating US dollar and US oil production falling to its lowest level since October 2014
- Iron ore rose by 17.7% to finish the month at US$64.50 per tonne. The benchmark price increasing above US$60 per tonne followed increased demand for Steel in China, where amongst other things construction and manufacturing activity has exceeded forecasts
- Silver increased by 15.8% to its highest level since May 2015 as it remained a safe haven asset for investors. The price was supported by poor macroeconomic data, with US gross domestic product growing at a marginal 0.5% during the first quarter of 2016. Another factor for the price rise in comparison to gold prices is largely due to silvers substantial industrial uses on the back of positive Chinese data.
Equity markets surveyed posted mixed results for the month of April:
- The All Ordinaries rose 3.2%. Mining heavyweights BHP Billiton Limited and Rio Tinto Limited led the way, adding 22.7% and 20.8% respectively to their market capitalisations with investors reacting favourably to the surge in commodity prices during the month
- The FTSE 100 rose by 1.1%, similarly impacted by the mining sector, rising to a four-month high. Similar to the All Ordinaries, stronger commodity prices pushed up heavyweight mining stocks Anglo American Plc, Rio Tinto and BHP Billiton
- The S&P 500 increased by a marginal 0.3%, as investors pondered earning reports. After showing strong results mid-month, gains were dissolved as U.S. stocks posted their largest weekly fall in more than two months during the last week of April. The main driver of the fall was Apple Inc, with its share price dropping by 14.8% during the month
- The Nikkei was the only market to slide, continuing its downward trend of the past 12 months and posting a decline of 0.6%, with the Bank of Japan’s decision to not provide further stimulus not sitting well with investors.
Top Deloitte WA Index ‘Movers and Shakers’ in April included:
- Eden Energy Limited (EDE) posted a 165.8% increase in market capitalisation, from AU$98m to AU$261m. The company’s share price increased after it finalised a US$25m financial assistance and incentives package that will see the establishment of a new manufacturing plant in the U.S. state of Georgia
- Perseus Mining Limited (PRU) posted a 119.5% increase in market capitalisation, from AU$212m to AU$465m. The share price soared following the announcement that the West African gold miner had updated its life of mine plan for Edikan in Ghana
- Gascoyne Resources Limited (GCY) posted a 109.2% increase in market capitalisation, from AU$71m to AU$149m. This followed a successful $AU15m placement to sophisticated investors to pursue gold targets at the prospective Dalgaranga and the Glenburgh Gold projects, both in WA.
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