UBS note on Australian Stock Sensitivity to Commodity Prices

There are many stocks in the Australian Stock Exchange (ASX) that are related to resources and commodities like metals and oils. We examine a few of the companies that UBS notes have a 'relationship' with respect to their company price and the commodity price. Among the companies we look at are Woodside Petroleum, BHP Billiton, Rio Tintio, Alumina, Zinifex, Newcrest, Oxiana and Santos.

Stocks related to Oil are becoming more sensitive to oil price reckons UBS. Movements in oil price are reflected in the price of energy stocks, especially when commodity prices break out from a range, exhibiting some momentum. This pattern is apparent for Woodside Petroleum and Santos since early 2004. Qantas has also become more sensitive to oil price movements in recent times.

Now, Australia also has two commodity giants listed in the ASX. They are: BHP Billiton and Rio Tinto. In the long term, UBS notes, oil, nickel and copper have been influential on BHP and RIO's daily direction. Gold has also been important for RIO. For BHP, in the recent year, oil has been also influencing their share price.

Besides the giants, the ASX also lists "minor" commodity companies which focus on a few or one major resource. For gold, Newcrest, Oxiana and Lihir Gold have had a "stable relationship" with the gold price since 2003. Alumina focuses on aluminum and Zinifex on zinc, but both companies are experiencing declining sensitivity to their underlying commodity prices.