TSX rebound hides fragile state of global economy
Here’s a look at companies that have benefitted or suffered in first half of year
Capping their best quarter since 2009, Canadian stocks have made a remarkable comeback as the nation went from a full shutdown to a gradual reopening amid the coronavirus pandemic. While some corners of the market participated in the recovery, many were destroyed.
The S&P/TSX Composite Index amassed about $297 billion of value in the second quarter after a brutal selloff in March with historically volatile peaks. A slowdown in virus cases and proactive stimulus measures from federal governments and central banks have helped boost investor sentiment.
But look closer and the benchmark is still down close to 10 per cent this year, with eight out of 11 sectors in the red. Tech and gold miners surged as investors lapped up work-from-home winners and sought safe haven assets, while energy and banks plunged amid a collapse in economic activity.
As trading in the first six months of the year ends, jitters can still be seen everywhere as the Canadian economy crumpled in a historic April contraction, U.S. Sun Belt states wrestle with mounting coronavirus cases and tensions between China and America continue to ratchet up.
“While early indications of increased consumer activity are encouraging, uncertainty remains regarding the ultimate impact of reduced government support later in the year, elevated unemployment and continued virus-related restrictions,” said RBC Global Asset Management portfolio managers Sarah Neilson and Irene Fernando in a report.
Here is a look at some who benefited and others that have suffered in the first half of this year:
BURGEONING TECH
Shopify Inc. (+150 per cent) — now the largest publicly traded company in Canada — has seen its shares jump as COVID -19 lockdowns led to an increase in online purchases with more brick-andmortar businesses joining the platform. Its shares also got a boost after partnering with retail and tech behemoths Walmart Inc. and Facebook Inc. to enhance their online-shopping platforms.
Real estate application software platform Real Matters Inc. (+114 per cent) also saw a large gain since the beginning of 2020, followed by supply-chain software provider Kinaxis Inc. (+93 per cent).
Ballard Power Systems Inc. (+126 per cent): The hydrogen fuel cell company took the No. 2 spot after Shopify as investors continue to pile money into ESG trades.
TRANSPORT BOOM & GLOOM
Cargojet Inc. (+55 per cent): With fewer commercial airplanes carrying cargo and more consumers shopping online, Cargojet has experienced a surge in volumes for all of its segments with strong first-quarter sales and profits.
Air Canada (-65 per cent):
Among the worst performers this year, the airline carrier had to cancel most of its international flights when the pandemic first hit and after the U.S.-Canada border shuttered. To get back to normal operations, it announced on Monday that it’ll drop its seat-distancing measures that have kept flights below full capacity starting July 1 and replace them with a flexible rebooking policy.
STUCK AT HOME
Canadian movie theatre company Cineplex Inc. (-76 per cent) experienced closures brought on by the pandemic, and took an added hit after Cineworld Group Plc backed out of its deal to buy it earlier this month. The stock is the worst performer on the TSX after reporting a first-quarter profit slump.
SAFE HAVEN
Gold miners: The virus outbreak pushed investors to seek haven assets, leading to a surge in the price of gold and miners of the precious metal. Semafo Inc. (+75 per cent), Teranga Gold Corp. (+76 per cent), Dundee Precious Metals Inc. (+62 per cent), Kinross Gold Corp. (+60 per cent) and Alamos Gold Inc. (+61 per cent) all ranked as top performers on the benchmark.
ENERGY IMPLOSION
The pain for oil and gas investors continues and companies muddle their way through plunging crude amid price wars and a slump in fuel consumption during the lockdown.
Among the worst performers were Vermilion Energy Inc. (-72 per cent), Seven Generations Energy (-64 per cent), Crescent Point Energy Corp. (-62 per cent), Enerplus Corp. (-59 per cent), Whitecap Resources Inc. (-60 per cent), Husky Energy Inc. (-57 per cent) and Cenovus Energy Inc. (-52 per cent) all ranking in the benchmark’s bottom 10 companies.