Bloomberg News

Canadian Stocks Advance on China, Growing U.S. Budget Optimism

December 05, 2012

Canadian stocks rose, snapping a two- day retreat, as optimism grew over U.S. budget talks and energy producers advanced following an easing of Chinese restrictions on investing in banks.

Primaris Retail Real Estate Investment Trust (PMZ-U) jumped 14 percent after real-estate investor KingSett Capital Inc. said it plans a C$4.4 billion ($4.4 billion) bid for the company. Canadian Pacific Railway Ltd. (CP) added 4.5 percent after the company said it plans to shrink its workforce by 23 percent. Suncor Energy Inc. (SU), the nation’s largest oil producer, rose 1.4 percent. Canadian Western Bank (CWB) fell 1.5 percent after analysts with Macquarie and Canaccord Genuity downgraded the stock.

The Standard & Poor’s/TSX Composite Index (SPTSX) rose 43.01 points, or 0.4 percent, to 12,180.19 at 2:37 p.m. in Toronto. The equity gauge has gained 1.9 percent this year.

“China is reversing the path it took a year ago to cool its economy,” said Barry Schwartz, fund manager with Baskin Financial Services in Toronto. His firm manages about C$450 million. “It looks like they’ll be in some kind of stimulus mode, so that helps the resources today.”

China’s regulators abolished a rule limiting insurers’ investments in commercial banks and Xinhua news agency said yesterday after a meeting of top party leaders that China will actively promote urbanization and expand domestic demand.

In U.S. budget talks, a few dozen Republicans have joined a bipartisan call to break the impasse between President Barack Obama and House Speaker John Boehner over taxes for the highest- earning Americans. The Republicans signed a letter calling for exploration of “all options” on taxes and entitlement programs, a signal that some rank-and-file members are ready to bargain.

Energy, Banks

Energy and financial stocks contributed most to gains in the S&P/TSX as nine of 10 industries advanced. Trading volume was 14 percent higher than the 30-day average at this time of day, according to data compiled by Bloomberg.

Suncor added 1.4 percent to C$32.71 and Canadian Natural Resources Ltd. (CNQ) gained 1.4 percent to C$27.80.

Primaris jumped 14 percent to C$26.27, on pace for its biggest gain since November 2008. The potential offer from KingSett Capital is worth C$26 per unit of Primaris, the Toronto-based real estate investor said in a statement today.

The S&P/TSX REIT Index (STREITS) rose 2.1 percent on the news. A close at that level would be the biggest gain for the index since August 2011. Allied Properties REIT increased 4.9 percent to C$32.33 and Calloway REIT gained 3.5 percent to C$29.04.

Canadian Pacific rose 4.5 percent to C$97.19 after Chief Executive Officer Hunter Harrison said yesterday he plans to eliminate 4,500 jobs by 2016. The company also plans to shutter container-car terminals and will evaluate assets from its 2007 acquisition of Dakota, Minnesota & Eastern Railroad.

Canadian Western Bank fell 1.5 percent to C$27.57. Sumit Malhotra, analyst with Macquarie Research, lowered his rating to neutral from outperform while Scott Chan, analyst with Canaccord Genuity, cut his rating to hold from buy. The bank yesterday reported earnings that fell short of analysts’ estimates. Canadian Western Bank has fallen 5 percent in the past two days.

To contact the reporters on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net; Eric Lam in Toronto at elam87@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net


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