Bloomberg News

Canadian Stocks Fall, Conclude Worst Quarterly Slide Since 2008

September 30, 2011

Sept. 30 (Bloomberg) -- Canadian stocks fell, completing the worst quarterly slide since 2008, as energy companies slipped after a gauge of Chinese manufacturing shrank for a third month.

Suncor Energy Inc., Canada’s biggest oil and gas producer, erased 3.4 percent as crude fell to a one-year low. Bank of Nova Scotia, Canada’s third-largest lender, sank 0.9 percent after Macquarie Group Ltd. cut earnings estimates for Canadian banks. Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer, lost 4 percent after a U.S. Department of Agriculture report estimated bigger U.S. inventories of corn and wheat than analysts forecast.

The Standard & Poor’s/TSX Composite Index lost 62.48 points, or 0.5 percent, to 11,623.84.

“It’s been a really ugly quarter,” Brendan Caldwell, chief executive officer of Caldwell Investment Management Ltd. in Toronto, said in a telephone interview. The firm manages C$1 billion ($963 million). “This morning people were dumping all the positions that they wanted to get rid of before the end of the quarter.”

The S&P/TSX slid 13 percent this quarter, the most since the last three months of 2008, as oil had its steepest quarterly drop since the financial crisis that year. Energy and raw- materials producers, which make up 46 percent of Canadian stocks by market value, have declined on concern over demand, as China showed signs of slowing growth and European leaders struggled to prevent a Greek default.

Manufacturing Index

Chinese government curbs on lending and the real-estate industry to damp inflation are slowing demand growth in the world’s second-largest economy. The reading of 49.9 for the September purchasing managers’ index, released by HSBC Holdings Plc and Markit Economics today, was unchanged from August and compared with a preliminary 49.4 figure published last week. Readings above 50 separate expansion from contraction.

The contraction is the longest since 2009.

The S&P/TSX Energy Index fell 1.3 percent for a 19 percent quarterly slide, the biggest decline of 10 groups in the Canadian stock index.

Suncor Energy lost 3.4 percent to C$26.76. Canadian Natural Resources Ltd., the country’s second-biggest energy company by market value, erased 2.4 percent to C$30.77. Cenovus Energy Inc., the country’s fifth-biggest energy company, fell 2.9 percent to C$32.27.

Banks Cut

The S&P/TSX Financials Index slipped 0.7 percent after Sumit Malhotra and Bryan Brown, analysts at Macquarie Capital Markets, cut their 2012-2013 earnings estimates for the country’s banks by 3 percent to 4 percent. Financial shares make up 29 percent of Canadian stocks by market value,

“The decrease is based on a more conservative outlook for the three fundamental factors that we believe will be most impacted by a prolonged period of historically low interest rates and volatile market conditions -- trading revenue, net interest margin, and underwriting & advisory fees,” Brown and Malhotra, Toronto-based analysts at Macquarie, wrote in a report.

Bank of Nova Scotia slipped 0.9 percent to C$52.72. Royal Bank of Canada, the country’s largest lender by assets, lost 0.7 percent to C$48.06. Toronto-Dominion Bank, the country’s second- largest lender, fell 0.6 percent to C$74.59.

Demand Ebbs

Canadian base-metal companies dropped after commodities tumbled into a bear market this month, dropping 21 percent since April, on concern that slowing growth will curb demand. Copper plunged 25 percent this month to complete its third straight quarterly loss, the longest slump since 2001.

Ivanhoe Mines Ltd., which is building a copper and gold mine in Mongolia with Rio Tinto Group, dropped 8 percent to C$14.45. First Quantum Minerals Ltd., the country’s second- biggest publicly traded copper producer, fell 3.1 percent to C$13.95. HudBay Minerals, Inc., which mines copper and zinc in Canada, lost 6.2 percent to C$9.77.

Fertilizer producers sank as corn tumbled after a U.S. Department of Agriculture report said inventories from last year’s crop were more than analysts expected, indicating demand had ebbed.

Potash Corp. slipped 4 percent to C$45.25. Agrium Inc., a fertilizer producer and farm retailer, declined 4.5 percent to C$69.75.

Gold mining companies jumped after the metal’s drop this month and concern about slowing economic growth boosted demand.

Barrick Gold Corp., increased 2.3 percent to C$49.11. Goldcorp Inc., the world’s second-biggest producer of the metal, rose 3.9 percent to C$48.07.

Kinross Gold Corp. rose 3.8 percent to C$15.57. Canada’s third-biggest gold producer announced an investment in White Bear Resources Inc. that would increase the its holding in the mineral exploration and development company to as much as 18.1 percent.

--Editors: Joanna Ossinger, Stephen Kleege

To contact the reporter on this story: Kaitlyn Kiernan in New York at kkiernan2@bloomberg.net.

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net


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