Deloitte WA Index rises for October

THE BOURSE WHISPERER: The market capitalisation of Western Australian ASX-listed companies continued their upward trajectory during October according to Deloitte.

Deloitte’s WA Index increased 1.8 per cent during the month to close at $145.38 billion.

Given all the bad iron ore news filtering around the sector it is something of a surprise to see iron ore producers leading the pack.

Deloitte indicated the reason for this is the seemingly insatiable Chinese appetite for the commodity.

WA-based iron ore stocks put on a healthy 14.5 per cent during October, which Deloitte said was driven largely by a speculated growth in demand for steel, combined with customers taking advantage of the low prices to replenish stocks.

“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,” Deloitte WA mining leader Tim Richards said.

Deloitte did point out, however the caution currently being demonstrated by investors due mainly to the announcement of China’s GDP data for the September quarter, which was released mid-October.

The Chinese economy grew by 7.4 per cent year on year in the third quarter, the slowest rate since early 2009.

Deloitte said the idea of slower growth occurring in China had spooked 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 per cent, 11.4 per cent and 9.9 per cent respectively.

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

Junior resource stocks to gain the attention of Deloitte’s WA Index for the month of October included Marengo Mining (ASX: MGO) and Central Petroleum (ASX: CTP), who posted increases in market capitalisation of 52.4 per cent and 44.7 per cent respectively.

Marengo Mining experienced a 52.4 per cent increase in its market capitalisation during October, increasing by $63 million to $182 million.

Marengo is focussed on its Yandera project, which it claims to be 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’s market capitalisation increased by $84 million, to close the month at $270 million.

Deloitte put this increase down to Central’s joint venture with Santos (ASX: STO) 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 to fund exploration activities, in return for up to a 70 per cent interest in the areas of interest.