Canada Stocks Have Best Week Since '02; Royal Bank, EnCana Gain

By Whitney Kisling and John Kipphoff

Oct. 17 (Bloomberg) -- Canadian stocks rose, sending the main index to its biggest weekly gain in six years, as financial shares climbed on accounting rule changes and energy companies advanced on higher oil prices.

EnCana Corp. led the rally among energy shares as crude rebounded from a 13-month low and Royal Bank of Canada paced the biggest weekly gain among banks and insurers in a decade, after Canada's Accounting Standards Board said it will give financial companies the flexibility to delay potential debt writedowns stemming from ``fair value,'' or ``mark-to-market'' accounting.

``That doesn't hurt. During the crash, mark-to-market exacerbated the panic liquidation,'' said Gavin Graham, director of investments at BMO Asset Management in Toronto, which manages about $45.3 billion. ``We've probably seen the bottom in the market, though we won't know for sure until later.''

The Standard & Poor's/TSX Composite Index climbed 3.2 percent to 9,562.49 in Toronto. Canada's benchmark gained 5.5 percent this week, the most since October 2002, after U.S. and European governments injected $2 trillion to rescue banks teetering amid the worst financial crisis since the 1930s. It was the first weekly gain in a month.

The S&P/TSX, which derives three-quarters of its value from commodity producers and financial companies, has still fallen 37 percent from its June 18 record after commodity prices slumped on concern that more than $660 million in credit losses at global financial institutions worldwide will cause a recession.

Record Advance

Royal Bank added 1.3 percent to C$46.47 today. Canada's largest lender notched a 13 percent advance this week, the best such rally since at least 1983, when Bloomberg's record begin.

Canadian Imperial Bank of Commerce gained 6.6 percent today to C$58. The fifth-biggest lender, whose writedowns of $6.3 billion account for two-thirds of Canadian lenders' total, climbed 18 percent this week, also the most since at least 25 years. Bank of Montreal climbed 5.5 percent to C$43.75. The 17 percent gain for the week was another record.

A measure of financial shares in the S&P/TSX added 1.6 percent today and had a weekly advance of 9.9 percent, the steepest since October 1998.

Crude oil for November delivery rose 2.9 percent to $71.85 a barrel after the Organization of Petroleum signaled it will announce a production cut at a meeting next week. Oil has tumbled more than 50 percent since reaching a record $147.27 in July on speculation that a world recession will curb fuel use.

`Enormous' Volatility

``The volatility remains enormous. We may revisit the lows as people figure out how deep the recession will be,'' said Graham. The world's governments and central bankers ``won't allow the 1930s to happen again. Banks are starting to outperform. Oil stocks were only pricing in $60 oil anyway.''

Encana, Canada's biggest energy company by market value, gained 7.3 percent to C$49.88 and added 15 percent for the week, the most since January 2002.

Suncor Energy Inc., the second-largest oil-sands mining company, climbed 8.4 percent to C$26.22. Husky Energy Inc. rallied 11 percent to C$32.90, the most since February 2002. Enbridge Inc., Canada's biggest pipeline company, added 7 percent to C$37.46. Oilexco Inc. surged 22 percent to C$4.37 after dropping 80 percent in a year before today.

A gauge of energy shares added 6.6 percent today, the most among the 10 industries in the S&P/TSX. Up 9.9 percent this week, the energy group is still trading 49 percent below its June 18 record.

``When you drop that fast and furious, it's natural to have some sort of snapback rally,'' said Andrew Martyn, who helps manage about C$450 million at Toronto-based Davis-Rea Ltd. ``It looks like people are doing a little bit of bargain hunting.''

Raw-materials producers dropped 11 percent this week, led lower by bullion mining companies, as gold tumbled the most in two months on easing inflation concerns, and copper touched the lowest since 2006 as U.S. house construction extended a slump.

Barrick Gold Corp., the world's biggest bullion miner, dropped 3.6 percent to C$28.01 today and fell 20 percent for the week, the most since the week of the October 1987 ``Black Monday'' crash. Goldcorp Inc. slid 5 percent to C$23.51 and slid 21 percent this week.

To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net; Whitney Kisling in New York at wkisling@bloomberg.net