Canada Stocks Rise, Cap Monthly Gain as Oil Jumps; Valeant Drops

Updated on
  • S&P/TSX rebound reverses February losses, halts 3-month slide
  • Valeant extends decline after disclosing SEC investigation

Canadian stocks rose a third day to halt a three-month slide on February’s final trading day, as advances among commodities producers overshadowed a plunge in Valeant Pharmaceuticals International Inc.

Shares of the drugmaker, facing intense scrutiny from investors and lawmakers over its pricing practices, plunged 18 percent Monday and widened losses in a flurry of late-afternoon trading after a company spokeswoman confirmed the U.S. Securities and Exchange Commission is investigating Valeant in a previously undisclosed probe. The company has canceled an analyst conference call after it withdrew its guidance and delayed its fourth-quarter results originally scheduled for today.

The Standard & Poor’s/TSX Composite Index still managed to end the day higher, climbing 0.5 percent to 12,860.35 at 4 p.m. in Toronto to erase February losses. The benchmark equity gauge rebounded 6.4 percent from a Feb. 11 low and is less than 1.2 percent from erasing declines for the year. The index narrowly avoided a ninth loss in the past 10 months with a 0.3 percent February increase.

“There’s a limit to how much further you can go down,” said John Wilson, Chief Executive Officer of Sprott Inc.’s asset management unit, in a Feb. 26 interview. His firm manages C$8.5 billion ($6.28 billion). “I doubt we’ll be sub $30 a barrel for oil two years from now, and the Canadian dollar’s taken most of the punishment it’s going to take. From a valuation standpoint, there’s certainly more attractive opportunities here in Canada.”

Global equities fluctuated and the S&P 500 erased a February gain for a third monthly loss, while crude advanced with gold after Group of 20 finance chiefs made only vague commitments to spur growth at a Shanghai meeting. China lowered requirements for the amount of cash its lenders had to lock away in a bid to soften the nation’s economic downturn.

The S&P/TSX is one of the best-performing markets in the developed world this year, battling with New Zealand for the top spot and outpacing returns from markets in the U.S., U.K. and Germany. Shares in the Canadian benchmark trade at about 20 times earnings, roughly 16 percent more expensive than the valuation of the Standard & Poor’s 500 Index, data compiled by Bloomberg show. Canada’s resource-rich index has benefited from a surge in the price of gold and crude’s rebound from a 12-year low.

Raw-materials producers rallied with metals prices. Gold rose for the fourth time in five days for its biggest monthly gain in four years as investors seek a haven from tumbling global equities. The precious metal is this year’s best-performing major asset, its 16 percent gain topping high-yield bonds, Treasuries, currencies and major stock indexes according to data compiled by Bloomberg.

Canadian raw-materials producers, led by broad gains among gold and base metals producers including Kinross Gold Corp. and copper producer First Quantum Minerals Ltd., surged 18 percent in February to lead the S&P/TSX’s rebound. Consumer staples stocks, led by a 16 percent rally in beverage maker Cott Corp. after posting a surprise profit, have also contributed to gains in the broader benchmark.

Energy companies increased 1.6 percent Monday, cutting a monthly slide to 1.5 percent. Canadian Natural Resources Ltd. added 3.3 percent and Encana Corp. surged 10 percent to pace gains. Energy and raw-materials producers account for about 29 percent of the broader S&P/TSX.

Health-care stocks, meanwhile, trailed the 10-industry S&P/TSX with a 23 percent slide in February, as Valeant slumped 29 percent to account for the majority of the losses. Valeant shares sank earlier in the month when it first disclosed it would restate some earnings due to its relationship with a mail-order pharmacy.

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