TORONTO (Reuters) - Canada’s resource-laden main stock index fell back on Tuesday, as oil and mining stocks were hit by a rout in commodity prices following China’s unexpected move to devalue its currency.
The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE sank as much as 1.4 percent before paring those losses to close down 51.72 points, or 0.36 percent, at 14,414.67. Seven of the 10 main sectors lost ground.
The People’s Bank of China devalued the yuan by nearly 2 percent overnight in China’s latest attempt to bolster its economy following a string of poor economic data.
“It’s created more negativity,” said Brian Pow, an equity analyst at Acumen Capital Partners in Calgary. “We’ve seen it in the oil price getting pushed down hard.”
Prices for copper, aluminum and U.S. crude oil hit six-year lows on concerns the cheaper yuan will make importing commodities more expensive for China, which is among the world’s top consumers of resources.
Energy stocks fell 0.8 percent, with Crescent Point Energy Corp CPG.TO down 4.9 percent at C$18.02 and Encana Corp (ECA.TO) off 2.5 percent to C$9.50.
Others were more sanguine about the Chinese move, as the state-run economy’s slowing growth is managed from above.
“China’s probably going to have a 5 or 6 percent growth rate. It’s a managed economy. It’s not your free enterprise economy, and they will get their growth one way or another,” said David Cockfield, portfolio manager at Northland Wealth Management.
“I just don’t see a huge impact,” he said. “It’s probably wise on their part to do that if they want to keep (their economic growth) at 5 or 6 percent.”
Over the longer term, Dollarama Inc (DOL.TO) and other retailers that import from China could profit from a cheaper yuan.
Volatility will remain part of the current market pattern, said Cockfield, who expressed optimism that Canada’s economic fundamentals are solid and the country will benefit from a robust U.S. economy, even as oil continues to struggle.
Other top decliners included Royal Bank of Canada (RY.TO), which lost 0.9 percent to C$76.61. The financial group was off 0.64 percent.
Bucking the trend were gold miners, many of which benefited from a safe-haven rebound in bullion XAU= prices following the yuan move.
Additional reporting by Solarina Ho; Editing by Peter Galloway and James Dalgleish