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Deloitte WA Index

Significant gains with listing of South32 & AFG; continued iron ore stability

10 June 2015: The Deloitte WA Index increased by 11.9% in May 2015, with the market capitalisation of Western Australia (WA) listed companies closing the month at AU$146.6bn.

The increase in the Index was primarily driven by the listing of South32 during the month, which ranked third with a market capitalisation of AU$11.7bn. Australian Finance Group (AFG) was another notable addition, closing the month with a market capitalisation of AU$251m.

The iron ore price, which peaked at US$61.50 during the month, further supported the growth of the Index.

Deloitte Clients & Markets Partner Western Australia Tim Richards said the addition of South32 marked an important event.

“The recent listing of South32 has reinforced WA’s continued position as a global leader in the resources sector, and is certainly one of the most significant changes in the WA Index in recent years, and a vote of confidence in WA as a whole,” Mr Richards said.

“In addition, iron ore’s continued recovery, closing the month at US$59 per tonne, provided stability which has generally been lacking over the last year.”

“This increase was mostly due to temporary supply shortages at China’s steel mills which led to decreases in stockpiles as demand outweighed availability of spot cargoes.”

Other commodities had mixed results. The price of silver rose, whereas aluminium prices suffered the biggest loss in May amongst the commodities surveyed, with nickel and lead also plummeting.

Silver posted the strongest gain for the month, up 4.4% and closing at US$1,673 per ounce, driven partly by expectations demand will increase from the solar energy industry which is expected to achieve significant growth in the next decade.

Uranium decreased by 8.5% to close at US$35.00 per pound, partly attributable to ongoing uncertainty over the future of some Japanese nuclear facilities, and news of Tokyo Electric Power Co’s decision to reduce stockholdings.

Aluminium prices experienced the biggest decrease, declining 12.0%. Concerns are mounting that the market is heading towards its worst period in recent years, with the threat of rising global supplies imminent, and no indication of production slowing down.

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With the exception of the Deloitte WA Index, equity markets surveyed showed mixed results:

  • The All Ordinaries remained largely unchanged in May amid investor caution as the Reserve Bank of Australia said business investment remained weaker than expected in mining and non-mining sectors, and economic growth forecasts were lowered as Australian businesses hold back major investment until China’s economy stabilises.
  • The FTSE 100 increased by 0.3% during the month, with positive market sentiment following the Conservative party securing a majority government in the General Election, offset by statements by the Greek Government that Athens would struggle to repay upcoming debt repayments to the International Monetary Fund raising the spector of default.
  • The Nikkei continued its steady growth, increasing by 5.3%. Market gains have been driven by the Bank of Japan’s monetary stimulus of 80 trillion yen, and a weaker Japanese yen which has helped the profitability of exporters,
  • The U.S. S&P 500 experienced a moderate gain of 1.0% on a lower unemployment rate, indicating the economy may be recovering after an uncertain start to the year.

Key Deloitte WA Index Movers and Shakers in May included:

South32 Limited (S32)

  • Listed during May, closing the month with a market capitalisation of AU$11.7bn.
  • South32 demerged from BHP and is a diversified metals and mining company with a portfolio of assets with operations in Australia, Southern Africa, and South America. 

Australian Finance Group Ltd (AFG)

  • Listed during May, closing the month with a market capitalisation of AU$251m.
  • Australia’s largest mortgage broking group listed on the back of strong demand in the domestic mortgage market, coupled with support from both domestic and international, institutional and retail investors.

Coal of Africa Limited (CZA)

  • 114.3% (AU$90m) increase in market capitalisation.
  • Completed Stage 3 of the capital raising of 144 million shares at an issue price of GBP0.055 during the month.
  • Granted a New Order Mining Right for its Makhado coal project by the South African Department of Mineral Resources.
WA’s Top 100 Listed Companies – at 31 May 2015

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