TORONTO: Canada's main stock index stumbled on Wednesday after telecoms stocks suffered deep losses on reports that US giant Verizon Communications Inc is looking to enter the market, while gold miners shares were pummeled as bullion prices tumbled.
Weakness in the two sectors more than offset gains in financial shares after US data helped calm fears of a rollback in economic stimulus programs.
Revised figures showed US economic growth in the first quarter was slower than first reported, held back by a moderate pace of consumer spending, weak business investment and declining exports.
Reports that Verizon has offered to buy Canadian startup Wind Mobile and is also in talks with rival startup Mobilicity pulled telecoms shares down 5.4 percent.
"Verizon is a monster," said Lorne Steinberg, president of Lorne Steinberg Wealth Management. "They would have a huge negative impact on the incumbents."
Verizon is a far larger company than any of the three companies - BCE Inc, Telus Corp, and Rogers Communications Inc - that now dominate the Canadian telecoms market, he added. "This would bring down the pricing and hurt the margins even if market shares did not change."
He said the move would be similar to Wal-Mart Stores Inc's entry to Canada in 1994, which shook up the retailing sector.
The three big Canadian telecoms companies all fell hard. BCE lost 4 percent to C$41.57, Telus fell 8 percent to $30.70, and Rogers Communications was down 9.2 percent at C$41.67. The three played a major role in the index's fall.
The Toronto Stock Exchange's S&P/TSX composite index closed down 53.52 points, or 0.45 percent, at 11,951.90. The benchmark Canadian index, which had jumped 1.4 percent in the previous session, is down 3.9 percent since the start of the year.
"We don't see any significant improvement in the TSX one year from now," Steinberg said. "We see Canada still having some downside from here."
Five of the 10 main sectors on the index were in the red.
The materials sector, which includes mining stocks, gave back 2.9 percent. Shares of gold producers fell 6.2 percent as the bullion price dropped to a near three-year low.
"People are panicking. Gold has to go through a bottoming process," said Sal Masionis, a stockbroker at Brant Securities. He expects the commodity to fall another $100 before a possible recovery.
Barrick Gold Corp fell 8.3 percent to C$15.50, and Goldcorp Inc was down 4.9 percent at C$23.40.
Financials, the index's most heavily weighted sector, were up 0.7 percent. Royal Bank of Canada, the country's biggest lender, climbed 1.4 percent to C$60.96, and Toronto-Dominion Bank added 0.8 percent to C$83.42.
Comments
Comments are closed.