TORONTO (Reuters) - Canada’s main stock index jumped on Tuesday, with Talisman Energy Inc TLM.TO surging 46 percent after Spanish oil major Repsol (REP.MC) agreed to buy the independent producer for $13 billion.
Other resource companies also gained as the Repsol move was seen as a model that could be replicated with other Canadian stocks suffering from sinking commodity prices while borrowing costs remain at historical lows.
“For companies that understand the business and understand what they are looking for, there could be terrific opportunities in oil and gas, in base metal mining, gold mining, and even in the industrial and real estate stocks that are down and dirty,” said Irwin Michael, portfolio manager at ABC Funds.
“People are recognizing that there is a difference between stock prices and business value,” said Barry Schwartz, a portfolio manager at Baskin Financial Services. “At some point it’s cheaper for companies with cash to go out and buy oil companies instead of drilling for themselves.”
A near halving in the global oil price LCOc1 since June has lowered price tags on producers like Talisman. Repsol has long been searching for oil and gas assets in North America and elsewhere.
The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE ended the session up 156.38 points, or 1.14 percent, at 13,861.52.
It had slumped in recent weeks as crude prices tested ever-lower levels. [O/R]
Banking stocks were also among the best performers on the day, which ABC’s Michael said was a sign of investor caution.
“In times of duress, you’ll never be faulted for going into the banks, whether they are expensive or not,” he said.
Reporting by Alastair Sharp; Editing by Paul Simao and James Dalgleish