The Deloitte WA Index retreated during February 2018 as the market capitalisation of Western Australian listed companies decreased by 3.4% to close the month at AU$175bn.
Deloitte Clients & Markets Partner – Western Australia, Tim Richards, said: “The WA Index has succumbed to its global market influences in February 2018. A fall in China’s manufacturing sector has driven this decline, as well as speculation of an interest rate increase in the US causing investors to lose confidence. The announcement of a tariff on steel and aluminium imports in the US added uncertainty to the global commodity market”
Major index players in February 2018:
- Saracen Mineral Holdings Limited’s market capitalisation rose by AU$106m (8.7%) to AU$1,317m following the release of a report announcing high grade drill results at Carosue Dam. In particular, drilling at its Karari mine has returned multiple thick high grade extensional results, suggesting the entity is on track to establish an extra 10-year mine life by leveraging existing plant infrastructure
- Northern Star Resources Limited’s market capitalisation increased by AU$302m (8.6%) to AU$3,793m in February 2018, off the back of revenue growth that assisted in driving up its cash and investments balance by AU$56million. The company also declared a AU$0.045 fully-franked dividend distribution. Overall Northern Star has continued to perform well, reaching its targets in gold production while maintaining a low cost base and no debt
- Seven West Media Limited’s market capitalisation increased by AU$98m (11.5%) from AU$851m to AU$949m during February 2018. The company announced its contract with Southern Cross Austero will be extended for a further three years, and released its half yearly results triggering a spike in share price.The results confirmed cost cutting initiatives were continuing with earnings before interest and taxes up by 7.2% compared to the prior year and the group profit before tax increasing despite a reduction in revenues.
Key commodities surveyed during February 2018:
- Iron ore strengthened by 8.1%, to US$80 per tonne, reaching its highest level in six months on the back of strength in Chinese steel prices
- Coking coal price increased by 5.8% to US$201 per tonne bolstered by reduced output as a result of the start of the Lunar New Year celebrations in mid-February 2018. Further, concerns around weather affected Australian production have also increased prices
- The price of nickel increased by 3.2% to US$13,744 per tonne, further consolidating considerable gains experienced in January 2018. The increase has been fuelled by declining production and bolstered by continued demand for its use in battery production
- Cobalt increased by 1.4% to US$81,000 per tonne as a beneficiary of bullish global demand for lithium
- Crude oil decreased by 4.3% to US$66 per barrel, having reached sub-US$60 levels during February 2018 for the first time in 2018 following record US crude oil production and increased inventory levels as at the end of February 2018
- The natural gas price plunged by 22.5% to US$2.59 per MMBtu, hitting its lowest level since June 2016, with US demand set to sink further during the coming spring season in April and May 2018
- Uranium reached near decade lows having fallen by 6% to US$22/lb amid uncertainty regarding the commodity’s future role in global energy, prompting the world’s biggest producers in Cameco (Canada), Kazatomprom (Kazakhstan) and Areva (France) to cut production in recent months.
The equity markets surveyed posted mixed results during February 2018:
- Following a volatile month, the US S&P 500 experienced a 3.8% decrease as a result of congress shutting down over budget disputes, and concerns over the rise of inflation at the beginning of 2018. After an initial dive the index recovered throughout the rest of 2018, albeit cautiously amidst rising speculation interest rates could increase to combat higher inflation. Further uncertainty arose at the end of February 2018 when President Trump announced a tariff on steel and aluminium
- The FTSE 100 fell by 4% due to global stocks becoming increasingly sensitive to the possibility of the Fed Reserve increasing US interest rates, as well as fears for implications of the new US steel and aluminium tariffs. In addition, sterling fell following the British Prime Minister’s speech on changes for a post-Brexit UK
- The All ordinaries decreased by 0.5% in reaction to speculation over the US interest rate increase and inflation. Furthermore, growth in the Chinese manufacturing sector decreased as business activities were disrupted due to the Lunar Chinese New Year
- The Nikkei dropped 4.5% following concerns over inflation and the possible US interest rate increase. The Japanese market was impacted by the sentiment of Wall Street, whilst the euro’s weakness against the yen hit companies as Japanese industrial output fell more than expected.
The top Deloitte WA Index Movers and Shakers in February 2018 included:
- Paladin Energy Ltd’s market capitalisation rose by AU$85m (229.8%) as the company’s share price spiked after the reinstatement of quotation and shareholders being able to trade their shares again. This followed Paladin entering into a deed of company arrangement and the completion of its company restructure
- Tungsten Mining NL also had a prosperous month, with market capitalisation rising AU$178m (160.0%) to AU$289m. This increase follows the announcement of positive results – a significant tungsten-molybdenum mineralisation intersection during drilling
- New Century Resources Limited’s market capitalisation increased AU$162m (35.9%) from AU$452m to AU$614m. This significant increase was sparked by the announcement of the execution of a long-term gas supply agreement with Santos for power supply with an estimated contract value of AU$100m. Moreover, the company announced a binding term sheet for a new 5.5 year offtake agreement covering 600,000 tonne of zinc concentrate produced by Century Zinc Mine in Australia.