ADVERTISEMENT

Bear Market in 14 Days Cuts $330 Billion From Canada Stocks

Canada Stocks Plunge, Putting Them on Pace to Enter Bear Market

(Bloomberg) -- Canada’s stock market has gone from a bull market to bear in just 14 trading days, wiping out C$454.2 billion ($330.6 billion) in value on the escalating spread of the coronavirus and plunging oil prices.

The S&P/TSX Composite Index slumped 20% from its Feb. 20 closing peak, putting it in a bear market, after riding the bull wave for almost four years. Now, stocks have buckled under concern that the virus and a new downturn in the oil sector will hammer the economy. The benchmark nosedived 4.6% Wednesday.

“Intensifying fears about the status of the viral outbreak have been compounded by the oil shock and roiled financial markets this week, with the energy-heavy TSX assuming the brunt of the weakness,” said Candice Bangsund, portfolio manager at Fiera Capital Corp. “Lack of visibility on the status of the outbreak and its implications for global growth suggests that volatility is almost certain to prevail in the near-term as investors digest the plethora of virus-related headlines at hand,” she said.

Bear Market in 14 Days Cuts $330 Billion From Canada Stocks

Canada’s stock market has been pummeled amid a price war between Russia and Saudi Arabia as both countries moved to increase production. The drop in oil will exact another heavy toll on the natural resource-dependent country, which generates about 9% of its gross domestic product from energy. On Monday, the benchmark plunged more than 10%, its biggest drop since the Black Monday crash in 1987.

That coupled with the World Health Organization’s declaration that the coronavirus is a pandemic has sent markets into a tailspin this week with the S&P/TSX Composite down about 12%.

Prime Minister Justin Trudeau’s efforts to introduce new financial measures to help mitigate the effects of the widening coronavirus outbreak in Canada has done little to calm panic-stricken investors.

Dip Buying

Volatility has spiked to its highest level on record. The Canadian dollar has weakened against the greenback to its lowest level since 2016 and government bond yields also slumped.

The prime minister said Wednesday the immediate plan includes providing faster unemployment insurance benefits to people who self-isolate, more funding for coronavirus research and financial assistance to provinces for medical supplies. If credit conditions tighten, the government will use the Business Development Bank of Canada and Export Development Canada to help provide funding to businesses.

“The Canadian government’s stimulus announcement was met with a muted market reaction as investors remain preoccupied with COVID-19 headlines that continue to whipsaw the markets,” Bangsund said.

An international mining conference attended by more than 23,000 people in Toronto is also the focus of potential new coronavirus outbreak in Canada’s most-populous city after a man in his 50s tested positive for Covid-19 after attending the summit. The country had 93 cases of the virus as of March 11.

Sadiq Adatia sees the slump deepening for now with an eventual bounce. “The worst is still yet to come,” said the chief investment officer at Sun Life Global Investments by phone. “There’s gonna be great opportunities in this environment but you have to be very careful at the entry points. Not every dip day is a buy day.”

To contact the reporter on this story: Divya Balji in Toronto at dbalji1@bloomberg.net

To contact the editors responsible for this story: Kyung Bok Cho at kcho7@bloomberg.net, Jacqueline Thorpe

©2020 Bloomberg L.P.