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Relief for Deloitte WA Index as commodity prices fight back
8 May 2015: The Deloitte WA Index strengthened slightly in April, with the market capitalisation of Western Australian (WA) listed companies increasing by 1.7% to close the month at AU$131.0bn.
The Index performance was boosted by stronger commodity prices, providing some welcome relief and a small sign of recovery in the Western Australian market.
The majority of commodities surveyed increased during the month, in particular crude oil prices have shown signs of recovering, increasing by 16.8% and iron ore has rebound from its ten year low price of US$46.70 per tonne. In addition, bulk metals, lead and zinc have increased 14.6% and 10.6% respectively.
“The recovery of iron ore price has brought timely relief to small and mid-tier producers,” said Tim Richards, Deloitte Clients & Markets Partner, Western Australia.
“However we certainly have not seen the end of price volatility, and it may take longer for excess production to be absorbed by the market, bringing things back into balance.”
Key developments included:
- Iron ore rose by 9.4% to close at US$58 per tonne. During April, Fortescue Metals Group experienced its strongest trading day in three years and BC Iron Limited’s share price doubled in a week. BHP Billiton Limited also slowed the expansion of its export terminal in Port Hedland to 290 million tonnes a year, which is expected to ease oversupply, reducing downward pressure on prices
- Crude oil increased by 16.8% to close at US$64.06 per barrel, its highest price so far for 2015. The increase came as oil drilling activities in the U.S. continued to decrease, coupled with increasing tension in the Middle East, which has increased speculations of possible supply disruptions.
- Lead also showed some resilience, increasing 14.6%. The rise was mainly due to rising demand in global automobile sales, especially in China, with car batteries making up of 85.0% of global lead consumption.
- Zinc prices experienced significant gains, posting a 10.6% increase due to threats of a supply shortage from the imminent closure of the MMG Limited Century zinc mine at Lawn Hill in Queensland later this year.
With the exception of the All Ordinaries, equity markets surveyed posted positive results:
- Locally, the All Ordinaries posted a loss of 1.5%, despite the rebound in commodity prices, as concerns mounted over the direction of the RBA’s official cash rate, the appreciation of the Australian dollar and suggestions that Australia’s AAA credit rating was at risk unless the Federal Government can display a credible plan for returning the Budget to surplus
- Strengthening commodity prices contributed to a gain of 2.8% for the FTSE 100. Mining stocks rallied following the news that China had implemented stimulus measures by reducing cash reserves held by banks to revitalise recent slower growth
- The Nikkei continued its steady growth, increasing by 1.7%. Over the past three months, the Nikkei has experienced staggering growth of 10.4% as a result of the pledge by the Prime Minister to reform Japanese corporate financing behaviour from traditionally preferred bank financing to equity markets and make Japanese stocks more attractive to investors
- The U.S. S&P 500 also experienced moderate growth, posting a slight gain of 0.9% on the back of better than expected first quarter company results and recovering oil prices.
Key Deloitte WA Index Movers and Shakers in April included:
Aziana Limited (AZK)
- 277.9% (AU$54m) increase in market capitalisation
- The gold and bauxite exploration and development company’s stock soared after confirming acquisition plans of U.S. company BrainChip Inc, the creator of world leading patented and proven technology for autonomous learning devices.
Coal of Africa Limited (CZA)
- 75% (AU$34m) increase in market capitalisation
- The emerging coal company with operations based in South Africa announced the completion of its stage three capital fund raising, which will enable a focus on future project developments.
Buru Energy Limited (BRU)
- 68.7% (AU$75m) increase in market capitalisation
- The increase in the share price of the oil and gas exploration and production company was on the back of an announcement of a contract secured with Titan Energy Services for the initial three-well Canning Basin program in the southwest Kimberley region of Western Australia.
WA’s Top 100 Listed Companies – at 30 April 2015
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