China worry hits Canada's TSX hard

Mon Jul 27, 2015 4:59pm EDT
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By Alastair Sharp

TORONTO (Reuters) - Canada's main stock index fell sharply on Monday, hitting its lowest level since January, in a broad retreat as heavyweight resource-based companies dipped on lower commodity prices and the latest plunge in Chinese equities.

The 1.3 percent drop was the seventh straight session of losses for the Toronto Stock Exchange's S&P/TSX composite index .GSPTSE, and its first day trading below 14,000 since January.

"There is a 'Sell Canada' theme going on," said Diana Avigdor, portfolio manager and head of trading at Barometer Capital Management. "At some point we're going to have a respite, but that's not an investment thesis."

Five of the six most influential weights were financial stocks, which overall lost 1.5 percent. Toronto-Dominion Bank (TD.TO: Quote) fell 1.7 percent to C$50.99 and Royal Bank of Canada (RY.TO: Quote) declined 1.4 percent to C$73.52.

The index lost 184.87 points to close at 14,001.37, with the energy group falling 2.8 percent and materials names shedding 3.1 percent. It fell as low as 13,956.05 during the session, a level last seen on Jan. 14.

Some one-fifth of Canada's index sells raw materials or energy products, and investors fret that China's transition to a more consumer-focused and slower-growth economy will plague their prospects.

"I'm somewhat kind of pessimistic on China. I certainly don't see a crash imminent, but the economy is slower than I would've thought," said John Johnston, chief strategist at Davis-Rea. He said a global recession could be unfolding.

Chinese stocks slumped the most in eight years, sending commodity prices falling. [O/R]   Continued...

A man walks past an old Toronto Stock Exchange (TSX) sign in Toronto, June 23, 2014.    REUTERS/Mark Blinch