TORONTO: Canada's main stock index gained 2 percent this week, with Friday's broad-based gains led by heavyweight energy and banking stocks as the index extended its two-year peak.
Investors are growing optimistic about the resource-rich index amid the increased likelihood of extended monetary stimulus in the United States and renewed Chinese growth.
"The investment theme for Canadian stocks is different now versus just a few weeks ago," said Marcus Xu, a portfolio manager at MY Capital Management in Vancouver. After suffering from ties to poorly-performing emerging markets, the commodities sectors are now likely to benefit as investors seek to make use of excess liquidity, he said.
"When liquidity is really high, eventually it is going to drive a rally in commodities," Xu said. "I'm surprised it didn't happen earlier."
The Toronto Stock Exchange's S&P/TSX composite index ended up 74.67 points, or 0.56 percent, at 13,399.42. It gained 2 percent for the week, adding to gains of 1.9 percent and 1 percent in the prior two weeks.
The index is at its highest level since July 2011. Suncor Energy Inc was the single biggest positive influence, gaining 1.6 percent to C$37.66. The integrated energy company reports third-quarter earnings next week. Pipeline company TransCanada Corp also helped, up 1.6 percent at C$46.96, and Canadian Natural Resources added 0.8 percent to C$33.32. Teck Resources Ltd pulled back 0.9 percent to C$30.27 after a sharp jump on better-than-expected earnings on Thursday.
John Ing, president of Maison Placements Canada, said global macro-economic trends would likely remain favorable for Canada's resource stocks.
"My view is that the super cycle is still intact," he said. "The much talked-about slowdown in China is a self-imposed slowdown in order to have orderly growth rather than the boom-bust periods we have in the west. They will still need resources and the appetite remains strong."
Supporting that point, Chinese factory data showed new orders at their highest in seven months in October.
Financial stocks, which along with resources play an oversized role in the index's fortunes, also gained. Toronto-Dominion Bank was up 0.6 percent to C$94.10 and Bank of Nova Scotia gained 0.5 percent to C$62.39. October 26, 2013.
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