Deloitte WA Index outperforms major financial indices

The market capitalisation of Western Australian listed companies included in the Deloitte WA Index ended 2007 at a record $179.3 billion, gaining 7.9 per cent in the month of December.

December gains were also made by the US S&P 500 of 0.6 per cent and London FTSE of 2 per cent, while the Australian All Ordinaries and Nikkei decreased by 2.6 per cent and 2.4 per cent respectively.

The WA Index outperformed all major financial indices in 2007 with an increase of 43 per cent. Gains made by the other indices in 2007 were: All Ordinaries 13.8 per cent , US S&P 500 4.2 per cent, FTSE 4.1 per cent. The Nikkei decreased by 11.1 per cent.

Deloitte Perth Office managing partner Keith Jones said the strong performance of the Deloitte WA Index was due to historically high commodity prices and a strong demand for WA resources.

In 2007, the "Big Three" Western Australian companies (Woodside, Wesfarmers and Fortescue) grew by a combined $35 billion.

Sixty-five per cent of Western Australian companies listed as at 31 December 2007 increased in value over 2007.

"Strong performances, particularly in the iron ore sector, contributed to the Deloitte WA Index setting a new record high in 2007", Mr Jones said.

In 2007, Fortescue Metals Group Limited was the most significant mover, increasing its market capitalisation by 498.3 per cent and closing at $20,993 billion.

"Fortescue had a great year in 2007, with a stream of positive announcements on resource and reserves (including the discovery of a 1.7bt resource at its Solomon project), a 1:10 share split, several new off take and joint venture agreements and it continued its rapid progression towards becoming a significant exporter," Mr Jones said.

Fortescue is currently developing a large iron ore project in the Pilbara region of WA, with the company targeting production of 45mtpa during 2008.

Other movers and shakers for 2007 were Woodside Petroleum Ltd (up $9,278 million or 36.5 per cent), Wesfarmers Ltd (up $7,836 million or 55.1 per cent) and Equinox Minerals Ltd (up $2,609 million or 283.3 per cent).

In the month of December, oil and precious metals posted moderate gains, while base metals and uranium declined.

"In 2007, the oil price gained 57 per cent, due to continual supply disruptions, increased demand, geopolitical tensions and the deteriorating security situation in Pakistan, Iraq and Nigeria," Mr Jones said.

In 2007, lead, tin, platinum and gold also performed strongly, gaining 51 per cent, 41 per cent, 35 per cent and 31 per cent respectively.

The commodities to decline in 2007 were zinc, nickel and aluminium, decreasing by 44 per cent, 23 per cent and 16 per cent respectively over the year.

The mining boom has also altered the composition of the Deloitte WA Index.

"Mining companies now account for over half the value of all listed Western Australian companies. We've also seen strong gains in the retail and wholesale sectors, due mostly to an excellent performance by Wesfarmers Ltd," Mr Jones said.

Commenting on the outlook for 2008, Mr Jones said there are several key drivers that will affect the Western Australian market. "Asian demand for commodities and the appreciating Australian Dollar will be major influences on the energy and resources market. Other factors such as interest rate rises and the global credit crunch are also likely to increase the volatility in the Western Australian sharemarket."