Canadian Stocks Fall Most Since 1987, Led by Manulife, EnCana

By John Kipphoff

Oct. 27 (Bloomberg) -- Canadian stocks fell the most in 21 years, led by finance and energy shares, on speculation the credit crisis will trigger investment losses at insurance companies and a recession cut global demand for commodities.

Manulife Financial Corp. dropped the most ever, leading a slide in finance shares on analyst reports that the global equity rout may force some insurers to raise capital. EnCana Corp. and Barrick Gold Corp. paced declines among oil and raw- materials producers as crude fell to a 17-month low.

The Standard & Poor's/TSX Composite Index slid 8.1 percent to 8,537.34 in Toronto, the most since a 11 percent plunge on ``Black Monday'' of Oct. 19, 1987. The S&P/TSX, which derives three-quarters of its value from resource and finance shares, has fallen 27 percent in October, poised for its biggest monthly decline since January 1919.

``Cash is king,'' said John Kinsey, who helps manage about C$1 billion for Caldwell Securities Ltd. in Toronto. ``There are too many question marks right now. It all depends on where the world economy goes. You don't want to stand in the path of an avalanche.''

A measure of finance stocks in the S&P/TSX fell 8.6 percent and a gauge of energy companies dropped 8.7 percent today, leading the drop as all 10 industries in the index slid. Raw- materials producers slipped 9.5 percent even as gold, copper and wheat rallied from declines.

Capital

Manulife fell 15 percent to C$21.17 for its steepest drop since demutualization in 1999. Canada's biggest insurer and rival Sun Life Financial Inc. may come under regulatory pressure to increase the amount of capital following stock market declines, RBC Capital Markets analyst Andre-Philippe Hardy wrote in a note. Manulife may need to add C$2 billion ($1.56 billion) in capital next quarter, and Sun Life, C$500 million, Hardy, based in Toronto, said. Sun Life slid 13 percent to C$26.29.

The MSCI World Index, a stock index of 23 developed nations, dropped 4.3 percent, extending its worst monthly drop on record.

More than $12 trillion has been erased from the market value of global equities this month after credit markets froze as financial institutions' writedowns and losses on investments related to U.S. mortgages topped $680 billion. In response, the world's biggest banks and securities firms have raised about $670.1 billion in capital.

Manulife was downgraded to ``market perform'' from ``outperform'' on Oct. 24 by BMO Capital Markets analyst John Reucassel, who estimated that the insurer might have to raise C$3 billion to C$5 billion in additional capital.

Royal, Scotiabank

Canadian banks, which have posted about C$11.6 of writedowns and losses on asset-backed investments in the past 12 months, also declined. Royal Bank of Canada, the country's biggest lender by assets, fell 8.6 percent to C$42.50. Bank of Nova Scotia, the third-largest, slipped 7.1 percent to C$36.32.

Oil futures fell 1.4 percent to $63.22 a barrel in New York, the lowest since May 2007. Crude have retreated more than 50 percent from a peak earlier this year, and prices of copper and wheat have plunged, sending the Reuters/Jefferies CRB Index of 19 commodities toward its largest annual decline on record.

Copper and aluminum prices will slide into a ``trough cycle'' in 2009 as a drop in consumption creates a surplus of metals used in homes, appliances and automobiles, Citigroup Inc. said, citing the prospect of a ``severe'' recession in many developed countries.

EnCana, the nation's biggest energy company, fell 8.4 percent to C$51.04. Talisman Energy Inc., the oil and natural- gas producer with about two-thirds of its reserves in North America or the North Sea, retreated 15 percent to C$9.44, the most in 24 years.

Pipeline

Suncor Energy Inc., the world's second-largest oil-sands producer, dropped 12 percent to C$23.18. Canadian Natural Resources Ltd. slid 10 percent to C$46.55. TransCanada Corp., the nation's largest pipeline company, slid 8.7 percent to C$32.63, the most since 1999.

Barrick Gold, the world's biggest bullion mining company, dropped 13 percent to C$22.51. Goldcorp Inc., the second-largest producer by market value, decreased 15 percent to C$18.75. Teck Cominco Ltd., Canada's biggest diversified mining company, declined 17 percent to C$10.76.

BCE Inc., Canada's biggest phone company, fell 4.6 percent to C$33.90, the most since Sept. 29. Toronto-Dominion Bank, Citigroup and others banks funding a pension plan's C$51.7 billion takeover of BCE, will start marketing debt to investors this week, according to a note last week from RBC Capital Markets analyst Jonathan Allen.

BCE is trading 21 percent below the agreed takeover price of C$42.75-a-share cash, amid speculation that the banks may balk at financing the transaction if they're unable to sell on the loans because of credit market turmoil. Toronto-Dominion, Canada's second-biggest bank, slid 8.5 percent to C$52, the most in at least a quarter century.

To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.