Dubai's debt troubles spook investors
Last Updated: Thursday, November 26, 2009 | 06:30 PM EST
Financial Post
Canada’s top benchmark exchange dropped alongside other global indices on Thursday, as Dubai’s mounting debt troubles spooked investors around the world.
The S&P/TSX composite index fell the most since Oct 28, dropping 200.10 points or 1.72% to 11436.80. The TSX venture exchange also declined, shedding 15.78 points or 1.10% to 1419.37.
South of the border, markets were closed for the U.S. Thanksgiving Day holiday. Elsewhere, equities fell in Europe and across the emerging markets.
“Investors have woken up to the debt strangle in Dubai,” said Adrian Mastracci, portfolio manager at KCM Wealth Management in Vancouver.
“I suggest that repercussions of the reported US$60-billion [debt] is a small appetizer.”
After markets closed on Wednesday, Dubai sought agreement from creditors of state-run Dubai World, to delay repayment of much of the reportedly US$59-billion in liabilities owed by the government’s flagship holding company.
Mr. Mastracci said Dubai’s debt issues underline investor concerns about growing government deficits around the world, particularly in the U.S and Europe.
“I’m still speechless on the rally since March,” he said. “However, the correction potential for this market is high. This is a market full of risk.”
Losers outpaced gainers by a ratio seven-to-one during Thursday’s session in Toronto, as all ten subindexes closed in negative territory.
Financials were off 1.63%, energy stocks dropped 1.71% and the materials group gave up 2.45%.
Cogeco Cable Inc. was Thursday’s biggest advancer, adding 5% to $35.10, as more than 225,000 shares traded hands on news that Rogers Communications Inc. raised its stake in Cogeco Inc. and its subsidiary Cogeco Cable in a combined $163-million deal. Rogers also announced layoffs Thursday and its shares fell 1.5% to $32.26.
Meanwhile, Manulife Financial Corp. fell 10¢ to $18.50. In a statement, the country’s largest life insurance company confirmed it has no exposure to Dubai World or its affiliates.
Commodity markets in New York were closed but in electronic trade, crude oil fell US$1.73 to US$76.23 a barrel late in the afternoon and gold rose US$5.20 to US$1,193.80 an ounce, another record high.
The Canadian dollar fell US1.35¢ to US94.30¢.
John Ing, the president of Maison Placements Canada Inc., said mounting U.S. debt is at the heart of gold’s current run.
“Despite big profits, Wall Street remains over-leveraged and undercapitalized,” he said in a note to clients. “To us it looks like another downturn is in the offing that will test the previous lows, cause the dollar to fall even further which will push gold beyond $2,000 an ounce in a made in America hyperinflation.”
Financial Post
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