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Deloitte WA Index rises despite mixed global sentiment


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9 November 2012: The market capitalisation of WA listed companies continued their upward trajectory during October, with the Deloitte WA Index increasing 1.8% during the month, closing at AU$145.38bn. Iron ore producers lead the way, with China’s appetite for the commodity resulting in a 14.5% increase during the month, driven largely by a speculated growth in demand for steel, combined with customers taking advantage of the low prices to replenish stocks.

Deloitte’s WA Mining Leader Tim Richards said: “renewed confidence in the short to medium term demand for steel has brought much needed relief to WA’s iron ore industry, and is allowing producers to re-evaluate whether previously halted projects are now feasible.”

Investors remain cautious, however, on the back of the announcement of China’s GDP data for the September quarter, released mid-October. The Chinese economy grew by 7.4% year on year in the third quarter, the slowest rate since early 2009. The news of slower growth renewed fears of lower levels of investment in infrastructure and commercial construction, negatively impacting base metals nickel, zinc and aluminium, whose prices fell by 12.4%, 11.4% and 9.9% respectively.

The All Ordinaries outperformed the WA Index in October, boosted by the strength of key iron ore producers BHP Billiton Limited and Rio Tinto Limited, as well as strong performances from the big four banks which announced robust annual profits.

Turning to global markets, the Eurozone is showing signs of progress as its finance ministers have moved to establish the European Stability Mechanism (ESM). The ESM will be the Eurozone’s permanent bailout fund, with initial funds of €500bn. Recently released macroeconomic data has highlighted the importance of advancement in policies and reforms in the Eurozone, with unemployment rising to an all-time high of 11.6% in October as the economy continues to further contract.

The FTSE increased by 1.1% this month, as the UK economy officially emerged from recession. UK GDP data released this month showed a 1% positive annual growth, the fastest quarterly growth rate in the past five years, boosted by the recent Olympics. In contrast, the Nikkei  this month fell by 1.2%, with a strong Yen continuing to diminish export revenues, while the US S&P 500 fell 2.4% on pre-hurricane jitters. The New York stock exchange remained closed for two days at the end of the month, the longest period since 1888, due to super-storm Sandy. Global markets have also increasingly been turning their attention to the US presidential election, with investors expecting the US “fiscal cliff” to have some impact on global investor confidence.

The Deloitte WA Index Movers and Shakers for the month of October included Aspen Group, Marengo Mining Limited and Central Petroleum Limited, who posted increases in market capitalisation of 99.4%, 52.4% and 44.7% respectively.

Real estate company, Aspen Group has entered the WA Index Top 100 this month at a ranking of 77th, having increased its market capitalisation by AU$101m to close at AU$203m. Aspen Group has recently been in the media spotlight due to director changes, and the company’s announcement of their commitment to their ongoing strategy to reduce the risk of earnings going forward by completing a structured exit from their non-core residential and commercial development businesses. The increase in the company’s market capitalisation in October stemmed from the successful completion of the company’s 1 for 1 accelerated pro-rata non-renounceable entitlement offer of new Aspen Group securities at AU$0.17 per security, raising gross proceeds of AU$101m.

Marengo Mining Limited (Marengo) experienced a 52.4% increase in its market capitalisation during October, increasing by AU$63m to AU$182m. Marengo is focussed on its highly prospective Yandera Project, one of the largest undeveloped copper projects in the Asia-Pacific Region. In early October, Marengo presented at the Resources Rising Stars Conference in Queensland, outlining the considerable resource potential of the Yandera Project and the company’s future development plan, helping to drive the share price appreciation experienced over the course of the month.

Central Petroleum Limited’s (Central) market capitalisation increased by AU$84m to close the month at AU$270m. This increase is related largely to Central’s joint venture with Santos Limited for the further exploration and potential development of permits in the Amadeus and Pedirka Basins in central Australia, which was announced in early October. The arrangement relieves Central of the obligation to provide substantial capital, with Santos Limited to fund exploration activities, in return for up to a 70% interest in the areas of interest.

Table: WA’s Top 100 Listed Companies as at 31 October 2012 (Please refer to downloadable version of the media release)

NB: See our media releases and research at www.deloitte.com.au

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Contacts

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:
Erin Buckley
Company:
Purple Communications
Job Title:
Phone:
Tel: +61 8 6314 6303 Mob: +61 404 511 161
Email
ebuckley@purplecom.com.au

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