Canada’s resource stocks have overtaken financials on the Toronto Stock Exchange (TSX) as
oil, metals and agriculture prices rally to record highs.
Energy and material companies now constitute 31.07% of the S&P/TSX Composite Index,
surpassing Canada’s banks, insurers and asset managers, which have a 30.9% weighting.
Enbridge (ENB), which has gained 18% this year, has the third-biggest weighting on the
benchmark TSX index, while Canadian Natural Resources (CNQ) ranks sixth.
Oil and metals stocks have been surging this year as investors seek safe haven assets with
markets reeling from a tight oil market, economic growth uncertainty and rising interest rates.
That has propelled the TSX to several record highs in March of this year.
Bank stocks, on the other hand, have been held back for the same reasons as the U.S. Federal
Reserve, Bank of Canada and other central banks around the world aggressively tighten
monetary policy to cool off red hot inflation.
The S&P/TSX Energy Sector Index has rallied 34% this year and the S&P/TSX Materials Index
climbed 26%, while financials have dropped 1.4%.
Copper miner Turquoise Hill Resources (TRQ) and oil and gas producer Vermilion Energy
(VET) are leading gains on the TSX, soaring 79% and 73% respectively this year. Meanwhile,
financials erased their strong start to the year, with four of Canada’s six biggest banks turning
negative this month (April). CI Financial (CIX) is leading losses in the bank sector, falling 31%.
The reversal in sector weightings could be a boon for the Canadian stock market as investors
seek companies that stand to benefit from volatile global sentiment. At one point this month
(April) the TSX had outperformed the U.S. S&P 500 index by the widest margin in 13 years.