TORONTO (Reuters) - Shares in a pharmaceutical company making a big buy surged for a second straight session and the rising price of gold helped beaten-down miners bounce higher in low-volume trade on Canada’s main stock index on Monday.
Valeant Pharmaceuticals International (VRX.TO) hit an all-time high and ended up 10.2 percent at C$95.85 after the drugmaker said it would buy eye-care products company Bausch & Lomb Holdings Inc for $8.7 billion.
“It’s enthusiasm for the target,” said John Ing, president of Maison Placements Canada.
The deal, which was initially reported on Friday, is expected to thrust Valeant into the upper ranks of the global pharmaceutical sector.
“It sounds like a good deal,” said Rick Hutcheon, president and chief operating officer at RKH Investments. “They’ve been quite the aggressive acquisitor. Presumably (Bausch & Lomb) makes a good fit.”
Meanwhile, a higher bullion price, supported by strong physical demand and a weaker dollar, spurred the rise in shares of gold companies. <GOL/>
“Gold prices have held their own ... that is giving a boost to some of these gold stocks,” Ing said.
Global gold miners .SPTTGD, which occupy a sizable chunk of the Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE, have lost more than one-third of their value so far this year.
“The bandwagon certainly is empty, a lot of the momentum players are out of them. There’s no question that the stocks are undervalued. Many of them are trading at less than 10 times earnings,” Ing said.
“However, everyone is focused on the bullion price and would look forward to a price north of $1,400 and that would likely cause a revival in the gold stocks.”
Spot and future prices for gold both closed under $1,395. <GOL/>
Holidays in the United States, Canada’s biggest trading partner, and in the United Kingdom kept investor interest and trading volumes low. About 55 million shares changed hands on the Toronto market on Monday, compared with a daily average of 324 million in April, according to the TMX Group.
“There is no particular news flow to drive the market one way or the other, with gold being the one exception,” said RKH’s Hutcheon. “Gold is at best in a trading range and at worst topping out,” he added. “It will continue to erode in value.”
The main TSX index closed up 29.15 points, or 0.23 percent, at 12,696.37 points.
Energy shares gave back 0.1 percent, reflecting a decline in the price of oil. <O/R>
Additional reporting by John Tilak; Editing by W Simon and Nick Zieminski