03/08/2009 - 09:18

WA stocks rebound strongly: Deloitte

03/08/2009 - 09:18

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The state's resource companies have led a strong rebound in the Deloitte WA Index in the second half of the 2009 financial year, with the market capitalisation of stocks jumping 30 per cent in the June quarter.

The state's resource companies have led a strong rebound in the Deloitte WA Index in the second half of the 2009 financial year, with the market capitalisation of stocks jumping 30 per cent in the June quarter.

 

The announcement is below:

 

WA resources companies have been hit hard by the global credit and commodity crash in the twelve months since Diggers and Dealers in 2008, but have rebounded strongly in the past three months delivering a record quarterly growth for the Deloitte WA Index.

Deloitte today released a special edition of the Deloitte WA Index at the opening of the Diggers and Dealers conference in Kalgoorlie, highlighting the performance of the Deloitte WA Index over the past twelve months, and some of the biggest movers and shakers among WA's ASX listed companies.

Deloitte WA Managing Partner Keith Jones said WA resources companies have led a strong rebound in the Deloitte WA Index during the second half of the 2008/09 financial year, delivering the largest quarterly increase in the value of the Deloitte WA Index in the past ten years.

However, the 12 months until June 30 2009 had been a rollercoaster for the share values for companies listed in the Deloitte WA Index, which had collectively dropped 38% during that period.

"The fallout from the global financial crisis on WA mining companies was severe," Mr Jones said.

"The last financial year marked the end of the global commodities boom, and the start of a long road to recovery. With the Deloitte WA Index being strongly tied to resources based industries, the sharp drop in commodity prices during the first half of the financial year had a more pronounced impact on the Deloitte WA Index than global share indices," he said.

However, Mr Jones said the Deloitte WA Index had also move upward sharply in the past six months in response to what was an improving capital and commodity market environment.

"The rebound in the value of the Deloitte WA Index has led to a 30% increase in market capitalisation of WA companies in the June 2009 quarter - the largest quarterly increase in the past ten years," he said.

"In the past six months, the collective increase has been 57.7%," Mr Jones said.

"This has been driven by improved availability of capital, improved commodity prices and sustained demand for most bulk commodities. Risk premiums remain high, however, corporate activity is increasing."

Despite finishing down 38% for the year ended June 30 2009, the Deloitte WA Index has out-performed all other major indices since the Deloitte WA Index commenced in 2000.

"Since its inception in 2000, the Deloitte WA Index has increased by more than 500%, or at a compound annual growth rate of 19.6%," Mr Jones said.

2009 Movers and Shakers

While the Deloitte WA Index delivered a year on year decline, there were a number of companies for which market capitalisation rose strongly during 2008/09. These were led by Catalpa Resources, which increased market capitalisation from $16m to $117m (621.9%), as the company moved forward with the development and funding of its Edna May Gold project in WA's eastern Wheatbelt.

Extract Resources experienced an increase in market capitalisation from $272m to $1.5b (446.3%), following favourable uranium discoveries at the Rossing South uranium project in Namibia. Red Fork Energy's market capitalisation rose from $53m to $133m (150.7%) with the expansion of its US oil and gas projects. (See table below for top ten movers and shakers).

Chinese demand support commodities

The 2008/09 financial year marked the end of the commodities boom, with prices for all major commodities prices, except gold, decline over the period.

Despite its fluctuations the USD gold price at 30 June 2008 was about the same as 30 June 2009, while declines were experience for other commodities, including oil (50.1%), nickel (29.8%) zinc (20%) lead (5.3%) and uranium (3.5%).

However, according to Mr Jones resource demand from China had played a significant role in the strong rebound for the Deloitte WA Index - mining stocks in particular.

"With signs of liquidity returning to global credit markets, the global financial crisis appears to have abated, and while subdued economic conditions exist, demand from China for commodities remains strong," Mr Jones said.

"Despite the economic slowdown in its own economy, Chinese investment in WA mining companies and strategic stockpiling of resources has helped mitigate the impact of the crisis. The Chinese Government has made economic growth its primary policy objective, and Chinese demand for resources has been a major factor behind the strengthening in the commodities prices."

 

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