Canadian stocks at record as world's second-best market

Canadian stocks have rallied to a record amid a resurgence in energy producers and gold mining shares, delivering investors the second-best returns among the world’s largest markets this year.

About $1.5 trillion in value has been restored to Canadian equities since March 2009, with the Standard & Poor’s/TSX Composite Index gaining 100 percent. The S&P/TSX Composite closed yesterday at 15,109.25, topping the previous high of 15,073.13 reached six years earlier on June 18, 2008. It is up 11 percent this year, trailing only the 19 percent advance in India’s S&P BSE Sensex among the world’s 10 biggest markets.

The Canadian government’s June 17 approval of Enbridge Inc.’s Northern Gateway pipeline to British Columbia’s Pacific coast will potentially open up new markets for oil producers. As well, sectarian violence in Iraq, escalating tensions between Ukraine and Russia and the harshest North American winter in three decades have fueled concerns about energy supply and boosted oil and natural gas prices this year.

“It’s about time, is what I would say,” Barry Schwartz, fund manager at Baskin Financial Services Inc. in Toronto, said in a phone interview. His firm manages about C$700 million ($646 million). “It’s the resource stocks that had been sliced in half and are finally waking up.”

The S&P/TSX rose 2.56 points, or less than 0.1 percent, to 15,111.76 at 9:40 a.m. in Toronto, extending the record with a sixth day of gains.

Oil, gold

Raw-materials producers plunged 49 percent in the previous three years for the worst performance among 10 industries in the S&P/TSX. Energy stocks lost 7.1 percent in that time as the price spread between local Western Canadian Select oil widened to record levels against global benchmarks, hurting profits for local producers.

Oil producers and mining companies have since rallied 20 percent and 13 percent this year respectively, the top two performers in the S&P/TSX. Detour Gold Corp., the worst stock in 2013 as gold slumped the most in more than 30 years, has rebounded this year with a 239 percent advance. Gold prices have risen 6.4 percent in 2014.

Natural gas producers Birchcliff Energy Ltd. and Crew Energy Inc. have jumped more than 77 percent this year after frigid weather stoked demand for gas to heat homes and businesses in the Northeast and Midwest. Natural gas futures have surged 44 percent since Aug. 9.

A year after U.S. stocks surged to a record, Canada has caught up. Foreign investors are pouring cash into equities and the weakening Canadian dollar is helping earnings for exporters, such as New Gold Inc. and Osisko Mining Corp.

Taking longer

“The comeback has taken longer due to our exposure to resources,” said Gareth Watson, vice president of investment management and research at Richardson GMP Ltd. in an interview. His firm manages C$28 billion.

The Canadian benchmark took more than 63 months to climb from its March 2009 low and surpass its pre-crisis high. The S&P 500 Index achieved the same feat in less than 49 months.

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