Reference no: EM132159235
The CEO has forwarded to you an interesting article and requires you to provide her with a deeper theoretical understanding of the issues discussed so that she can fully engage in the lively discourse at an upcoming conference.
You are required to find a newspaper article or web page report of an item of accounting news, i.e. it refers to a current event, consideration, comment or decision that has been published after the 1st of January 2018. Your article could also come from one of the professional journals. The article should not come from an academic journal. Academic journals generally do not contain news articles or articles of less than one page and are usually only published 2 or 4 times a year. If you are having a problem ensuring that your article is from an appropriate source contact your subject coordinator.
You then need to explain the article that you have found in your own words and clearly relate the concepts, ideas and facts within the article to one or more of the theories or topics that you have studied this session. Support your analysis of the assumptions and implications of the topic or theory as appropriate with reference to sources in APA 6 style. For example, this article from the Sydney Morning Herald in April 2016 could be linked to the topics of accounting regulation and measurement (and perhaps others). You must provide a copy of the article or web page, with details of the source, date and page number with your answer.
The article is as follows
By Darren Gray - 'Extraordinary turnaround': Big miners pushing ASX towards 10-year high
Foreign investors renewing their interest in Australian mining companies, buoyant commodity prices and a gradual re-rating by the market have helped push the stock prices of Australia’s two biggest mining companies to record recent highs.
BHP rose almost two per cent on Thursday to close at $32.75, its highest closing price since September 2014, while Rio Tinto rose 1.3 per cent to $82.95 in its best finish to a trading day since 2011.
This week’s surge by the miners comes as the ASX200 on Thursday inched to within a few points of its highest intra-day level in a decade.
Bloomberg data indicates that resource stocks have played a key role in lifting the wider index over the past year, with the ASX/200 materials index up 27.2 per cent. This contrasts starkly with the performance of the financials index, which is down seven per cent over the same period.
The stock prices of the big four banks are all down on where they were one year ago, and the recent revelations at the banking royal commission has hurt investor sentiment toward them.
Both Rio and BHP are up by more than 120 per cent in two years. That is huge. For any stock that’s a good performance, to more than double in two years. But for a blue chip stock that’s an extraordinary turnaround in fortunes,” said Michael McCarthy, chief market strategist at CMC Markets Stockbroking.
Mr McCarthy said the wider Australian market had made “a spectacular gain” since hitting a low in early April, identifying three factors that had played a key role in its rise.
These were a weakening Australian dollar against the US dollar which “makes our shares look cheap internationally,” the upswing in commodity prices, and the concerns over international trade that are “rattling markets globally,” he said.
Both Rio and BHP are up by more than 120 per cent in two years. That is huge.
Michael McCarthy, CMC Markets
Citi analyst Clarke Wilkins said “a combination of factors” was helping lift BHP's share price.
“Commodity prices are holding up relatively well, despite the strength of the US dollar. And the stocks are a net beneficiary of a lower Aussie dollar, as every commodity is priced in US dollar terms,” he said.
Investor appetite for Australian miners was also being lifted by events well outside the miners’ control.
“Other sectors in the market have got their issues at the moment, in terms of obviously the negative news flow from the banking royal commission...so on a relative basis the mining sector is quite attractive I think, as a destination for funds,” he said.
Investors were also recognising that miners had reduced debt, reduced capex, and had boosted shareholder returns.
“We see further upside, effectively. It’s not an overnight thing, but it’s a gradual re-rating by the market of the behavioural change that we’ve seen from management - in terms of remaining disciplined on capital, not doing value-destructive [mergers and acquisitions], and continuing to return excess cash to shareholders. So in conjunction with our outlook for global growth and our outlook for commodity prices, that improvement in the behavioural side of management leads to a continued, ongoing re-rating of the stock,” he said.
UBS analyst Glyn Lawcock said there were general investors who had sold out of Australian miners in 2011 because of “rampant investment” by the industry, falling prices and over-supply. This saw stock prices fall and stocks “de-rated from a multiple perspective”.
But fast forward to today and investors were observing an industry that had “turned the corner, is behaving in a disciplined manner, it’s not investing rampantly at the moment, it’s not doing unnecessary over the top M and A,” he said.
“And so that general investor I think has come back onto the register, and he’s been the driver of this most recent push up in the share prices, helped by the fact that commodity prices are still doing better than everyone thinks.”
Marking criteria
Description with in depth discussion and identification of all the key issues.
Response identifies a range of relevant topics and theories and is able to deconstruct and evaluate the issues through the use of theories and arrive at a logical position, for example by synthesizing the insights of different theories.
Response critically evaluates the underlying assumptions and implications of the applied theories or topics. Exemplary use of relevant sources from within prescribed materials and attempts to include sources beyond prescribed material.