IN THE NEWS / Toronto Stocks End Much Lower On Profit
Toronto's stock market closed lower on Tuesday for a change as investors moved to take profits after a string of advancing sessions.
The bellwether 300 Composite Index on the Toronto Stock Exchange fell 63.92 points or nearly 1 percent to 6758.90 points, following three sessions of gains.
It failed to keep up with New York's key index on Tuesday: the Dow Jones Industrial Average rose 14.67 points to 9355.22 after remaining closed a day earlier for Martin Luther King Jr.'s holiday.
Market players in Canada's largest equities bourse did some profit-taking, forcing the index downward. "No market goes straight up or straight down," said Irwin Michael, portfolio manager at ABC Funds.
The volatility is "testing everyone's patience," Michael noted.
Toronto's recently introduced blue chip index, the S&P/TSE 60, was down 4.39 points, or 1.1 percent, to 392.66.
Many investors were cherry-picking issues and taking some higher while larger companies languished, analysts said.
Investors traded a bit more than the usual number of shares: 105 million worth C$2 billion changed hands.
Falling issues beat out rising ones 540 to 462 and 262 ended flat.
Overall in Toronto, all but one of the TSE 300's 14 subindexes slipping into the negative zone, led by oils, down 2.2 percent.
Forestry products, gold and precious minerals, and financial services lost more than 1 percent each.
Only the transportation sector bucked the negative trend.
In the transportation group, Canadian National Railway rose C$2.05 to C$81.55 following its fourth quarter results and news it raised its quarterly dividend.
Microforum Inc. jumped C$0.33 to C$2.35 on more than five million shares, topping most active stocks. The marketing and electronic commerce web-site maker has been a favorite in recent sessions on speculation that it would take on a major U.S. fashion house as a client.
Miner Barrick Gold Corp. lost C$0.40 to C$30.15.
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TSE Oil And Gas Index down 105.42 to 4,689.81
Before you waste tears bemoaning the fate of the TSE's oil and gas stocks, consider that even after yesterday's selloff, the group is up 1 per cent so far this year. Of course, that pales into insignificance, compared with the industrial products sector's sizzling 8.66-per-cent climb. But at least it is on the right side of the ledger. Yesterday, Suncor released its fourth-quarter earnings report, showing share profit had dropped to 39 cents from 66 cents a year earlier. Suncor shares sank $1.55 to $43.60. Petro-Canada, which will unveil its numbers tomorrow, dropped 45 cents to $17.70.
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Forecasters Will Cook Up A 'Meal' Some contradictory views may be hard to swallow Barry Nelson, Calgary Herald Here's your bargain basement ticket to Calgary's biggest, splashiest business dinner of the year.
Wednesday evening, 1,185 business people who forked out $85 each are expected to pack the convention centre for the 22nd annual forecast dinner presented by the Calgary Society of Financial Analysts. For that price, they'll wine and dine and feast on a full banquet of economic and stock market predictions from three of Canada's top financial forecasters.
For the price of today's Herald, here are some tasty hors d'oeuvres. Today I offer a snack-size, sneak preview of the full meal deal CSFA guests will savour Wednesday evening.
To the joy of one and all, two of the evening's three star speakers slug it out by offering directly contradictory views of the year ahead.
Paul Summerville, chief economist for RBC Dominion Securities, thinks the United States is headed for a recession that will slop across the border into Canada.
Ira Gluskin, president of Toronto's Gluskin Sheff & Associates, which manages about $1.3 billion worth of Canadian and U.S. equities, looks for Canadian stocks to post double-digit gains, thanks largely to exports to the U.S. market.
"The central theme I'm going to talk about is that there are serious imbalances in the U.S. economy and I'm going to make the case that I think the U.S. is headed for a recession beginning in the latter half of 1999 or the first half of 2000," Summerville says.
"I see a period of significantly slower economic growth that risks being a recession. A year ago, we would have said Asia is unsustainable. Now it's the U.S. "The American current account deficit as a percentage of gross domestic product is reaching unsustainable levels. And American savings rates, both for households and corporations, is unsustainable."
Summerville says Americans are borrowing to consume and are likely borrowing on the strength of stock market assets. If the market falls, people will consume less.
And, he says, only higher interest rates and slower economic growth will deal with the U.S. current account trade deficit.
Summerville thinks there will be nine to 18 months of weak growth "that risks being a recession" in the U.S. He expects significant interest rate increases beginning in the next six months and looks for Canadian economic growth to be slowed by both higher interest
rates and reduced U.S. demand for our exports.
Gluskin, on the other hand, calls himself "moderately optimistic" and predicts the TSE 300 index could gain about 12 per cent this year.
"I think this could be Canada's year," he says. "I would suggest that Paul Summerville has been predicting there is going to be a decline for some considerable period of time."
"And what I've been observing is that the U.S. economy has tended to
produce more positive results than had been predicted by many economists."
"Low interest rates and low inflation are the key to the stock market. They are both low and there is no reason to believe there is going to be an end to this."
Gluskin argues that Canada's big advantage lies in a favourable exchange rate that makes it easy to export to the U.S.
He points out that Canadian equity markets have long underperformed those in the United States, making shares of Canadian companies more attractive than their American counterparts.
Gluskin says there are "thousands of companies with very good
prospects in Canada and the US." "It's difficult to time the market, but it's possible to conclude that certain companies are good companies."
Names Gluskin likes include Geac Computer Corp., Celestica Inc., Linamar Corp., Teknion Corp. and Calgary's Boardwalk Equities.
On the oil and gas front, Don Whatley, a Toronto analyst who follows the sector for Warburg Dillon Read, forecasts an average 1999 oil price of $14.50 US a barrel and an average gas price of $2.50 Cdn a thousand cubic feet. "I'm fairly optimistic that the second half of the year will be quite a bit better than the first half," Whatley says. He notes there is now a huge global oil glut and that demand has been eroded by the collapse of Asian economies.
Whatley thinks the stock market is looking for a global production
cut of about a million barrels a day and he thinks there is a 50-50 chance OPEC may agree to a reduction of this amount. "If they do, the supply overhang could be gone by the third quarter. "If not, there is so much oil being taken off the market by non-OPEC sources
that we could well achieve a significant level of reduction without OPEC cuts," Whatley says.
He calls attention to the facts that the Independent Petroleum Association of America has forecast U.S. production will be reduced by 500,000 barrels a day in 1999 and Canadian production is already down about 200,000 barrels a day.
"The key surprise in 1999 could be just how much non-OPEC production comes off the market. There could be sufficient reduction to turn the market around by the second half of the year," Whatley says. And he predicts that summer natural gas prices could be as good as winter prices this year. "I'm optimistic that 12 months from now we'll see much better stock prices than we've seen through most of 1998."
No matter how these forecasts turn out, it's safe to predict that Wednesday's dinner will be a bang-up success that does a lot of good for Calgary students and, ultimately, investors. The Calgary Society of Financial Analysts contributes $10 from every ticket sold to a nest egg called the Calgary Portfolio Management Trust.
Created as a joint venture between the University of Calgary's faculty of management and the CSFA, the trust, now worth about $150,000, is managed by U of C students who develop their investment skills using serious money. "As far as I know it's the only source of direct money management experience that business students in Alberta can receive, which gives them a big edge in starting their professional careers," says Ken Rowan, an institutional salesman for Calgary's FirstEnergy Capital Corp. who is chairman of the forecast dinner and incoming CSFA president.
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