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Markets fall on commodities slump and Eurozone fears


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6 June 2012: The market capitalisation of WA listed companies which comprise the Deloitte WA Index decreased 11.5% during May to AU$145.4bn.

Deloitte’s National Mining Leader Tim Richards said this decline mirrored the downward pressure experienced by global equity markets.

“The fall in the market capitalisation was driven largely by decreases in commodity prices as a result of renewed concerns surrounding the health of the global economy, continued speculation regarding Greece’s potential exit from the Euro, and concerns surrounding the ability of Spain to provide further support to its beleaguered banking system,” he said.

Oil (WTI) experienced an eight-month low during May, decreasing 17.5% from US$104.87 to US$86.50 per barrel.  Base metals, tin and copper dropped 13.7%, and 11.9% respectively, while iron ore fell 7.3% due to concerns surrounding Chinese economic growth.

Investors focused on the uncertainties within Europe, which combined with the lacklustre performance of commodity prices for the month, resulted in all global indices surveyed falling. The All Ordinaries decreased 7.5%, while the US S&P 500 and FTSE 100 fell by 6.4% and 7.6% respectively.

Following the inconclusive Greek general election in May, speculation over Greece’s potential exit from the Euro has intensified, and is likely to continue to do so prior to the re-run of the general election to be held on 17 June 2012; despite the EU Summit confirming its continued desire for the country to remain in the Euro. Adding to European woes this month was the decision by ratings agency Moody’s Investor Service to downgrade the credit ratings of a total of 16 Spanish banks, justifying the cut by citing the banks’ adverse operating conditions including Spain’s relapse into recession.

The Nikkei fell by 10.3% in the month of May after Fitch Rating Agency lowered Japan’s credit rating from AA to A+ with a negative outlook; the first downgrade in Japan’s credit rating since 2001. The Agency criticised Japan’s poor success in reducing debt levels, with a prediction by Fitch that debt will reach 240% of GDP by the end of 2012.

Only eight companies within the Deloitte WA Index Top 100 experienced gains over the course of the month. The Movers and Shakers for May were Buru Energy Limited, Noble Mineral Resources Limited and Cash Converters International Limited, who increased their market capitalisation by 22.3%, 14.1% and 4.3% respectively.

Onshore oil and gas exploration company, Buru Energy Limited, continues to beat the market with positive results coming from its drilling in the Canning Basin, which has the potential for significant increases to current estimates of recoverable resources. The company’s market capitalisation closed at AU$811m at the end of May, up AU$148m from the previous monthNoble Mineral Resources, an explorer and developer of gold deposits in the goldfields of Ghana, West Africa, increased its market capitalisation by AU$23m to AU$192m during May. This rise coincided with the completion of its maiden shipment of gold bullion from its Bibiani Gold Project.

Cash Converters International increased its market capitalisation by AU$10m to AU$232m at the end of May. The company has shown resilience in the face of global uncertainty, reporting strong demand for its personal loans within both Australia and the UK.

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Contacts

Name:
Erin Buckley
Company:
Purple Communications
Job Title:
Phone:
Tel: +61 8 6314 6303 Mob: +61 404 511 161
Email
ebuckley@purplecom.com.au
Name:
Tim Richards
Company:
Deloitte Australia
Job Title:
Lead Audit Partner and Mining Leader – Western Australia
Phone:
Tel: +61 8 9365 7248, Mob: 0437 009 416
Email
atrichards@deloitte.com.au
Name:
Warrick Hazeldine/Ryan McKinlay
Company:
Cannings Purple
Job Title:
Phone:
Tel: +61 8 6314 6300; Mob: +61 417 944 616
Email
whazeldine@canningspurple.com.au

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