|Oh, Canada! |
Canada Stocks Lead as Barrick Surges, Banks Forgo Aid (Update2)
By John Kipphoff
Feb. 13 (Bloomberg) -- Canada is beating the biggest stock markets this year as the global recession prompts investors to buy its gold producers and banks.
The Standard & Poor’s/TSX Composite Index of shares traded in Toronto has fallen 2.7 percent, less than stocks in the U.S., Australia, Spain, the U.K., Germany, Hong Kong, France, Switzerland and Japan. The median drop among benchmark gauges in the biggest developed countries this year is 7.3 percent.
Barrick Gold Corp. and 11 other Canadian producers surged 5.2 percent as a group in 2009. Bank shares fell 8 percent, the second-best performance among the biggest economies, which averaged a 13 percent loss. Lenders in the S&P 500 plunged 42 percent this year.
“The biggest driver is the confidence in gold as an asset class,” said Frank Holmes, who oversees about $2 billion as chief executive officer of U.S. Global Investors Inc. in San Antonio. “It also has a different banking system that’s very deposit driven, and banks that have a broad deposit base in Canada have done better than those in the U.S.”
Toronto-based Barrick, the world’s biggest gold producer, is benefiting as investors boosting their inflation forecasts buy the precious metal as a hedge against consumer price increases. A gauge of inflation projections for the next decade, derived from yields on 10-year Treasury notes, climbed to 1.23 percent from 0.12 percent on Jan. 5.
Ninth Annual Gain
In the same period, gold added 9.2 percent to $936.80 an ounce in New York, the highest price since July. It gained in six of the past eight days and is rising for the ninth straight year.
Peter Schiff, who oversees about $1 billion as president of Euro Pacific Capital in Darien, Connecticut, said as much as 20 percent of his clients’ assets are invested in Canada, mostly in mining and energy companies. He’s betting inflation will cause gold to rise to more than $1,500 an ounce this year.
“A strong gold price will be helpful to the economies that have a big mining industry,” Schiff said. Canada is the world’s seventh-biggest gold producer.
Barrick surged 109 percent to C$44.95 since sinking to a five-year low in October. Kinross Gold Corp. and Yamana Gold Inc. also more than doubled in three months. They are among gold companies worldwide that sold more than $2 billion in stock since November. Iamgold Corp. is up 194 percent from its Oct. 23 low. Kinross, Yamana and Iamgold are all based in Toronto.
‘Count On’ Gold
The rally lifted gold producers to 11 percent of the S&P/TSX yesterday, the highest weighting in Canada’s benchmark compared with monthly values since 1996, according to Howard Silverblatt, S&P’s senior index analyst in New York.
“Gold is the only thing you can count on,” said Andrew Martyn, who helps manage about C$420 million ($337 million) at Toronto-based Davis-Rea Ltd.
The World Economic Forum says Canada’s banks are the soundest because they speculated less on mortgage assets that have proved toxic. Canada’s banks, which account for about 6.7 percent of the industry’s worldwide market value, suffered only 1.5 percent of the $817 billion in mortgage-related losses reported globally.
As Canada’s banks wrote down $12.5 billion since 2007, its six biggest lenders, including Royal Bank of Canada and Toronto- Dominion Bank, attracted new investment, selling C$9.2 billion in stock and bonds as a group since October.
Unlike their global counterparts, which have accepted almost $500 billion in bailouts, Canada’s banks have done without direct government aid. While Canada is providing guarantees on more than C$200 billion in bank debt and has bought mortgage bonds to boost lending, none have required taxpayer-funded cash injections.
“There is a sense that the Canadian banks are much better regulated and in stronger shape,” said Quincy Krosby, Hartford, Connecticut-based chief investment strategist at Hartford Financial Services Group Inc. The firm has $346 billion in assets. “The Canadian market has come on the radar screen over the last month or so.”