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CIBC WM Slashes TSX Target
CIBC World Markets doesn’t expect the S&P/TSX composite index to perform as well as it previously forecast because of dimming global growth prospects and selling pressure on the markets.
The brokerage’s chief economist and chief strategist, Jeff Rubin, has lowered his year-end target for the TSX to 13,000 from 14,300 and reduced his 2009 target to 14,000 from 15,250.
“Our targets imply a slightly negative annual total return from the TSX this year but a more typical return next year,” he says.
Since Labour Day, the index has shed more than 1,600 points and closed at an eight-month low of 12,146 on Tuesday. In June, the TSX reached an all-time high of 15,073.
Rubin has trimmed his overweight position in energy stocks by 2.5 percentage points and shifted it into financials.
“The Treasury’s confidence-boosting steps to shore up Freddie [Mac] and Fannie [Mae] sooner rather than later will help Canadian players with U.S. mortgage assets,” Rubin adds.
To download a copy of the report from the CIBC World Markets website, click here.
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Institutional Investors Adjust Strategies
The global credit crisis that brought the Canadian asset-backed securities market to a near standstill last year has prompted some 40% of the country’s institutions to make changes to their fundamental fixed-income investment strategies, according to a study.
The companies altering their strategies are divided in their intentions: two-thirds tell Greenwich Associates they are upgrading the credit quality of their portfolios, about one in three say they are looking to unwind underperforming positions and almost 30% say they are shortening portfolio duration.
At the same time, fully one quarter of the Canadian institutions that are changing their fixed-income investment strategies in response to the credit crisis say they are in the market looking to take advantage of investment opportunities in illiquid instruments, primarily investment-grade credit products.
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“These findings suggest that the credit crisis has been widely disruptive for Canadian investors and quite painful for a smaller group of institutions with relatively high levels of exposure to ABS products hit the hardest,” says Greenwich Associates consultant Peter Kane. “However, the research results also reinforce the view that the crisis has been less catastrophic in Canada than in the United States.”
While Canadian institutions have been increasing their exposure to international fixed-income since the repeal of the foreign property rule, the bulk of this investment has gone to highly rated and highly liquid products, as opposed to the structured products that had become popular among investors in the United States and Europe.
For example, Canadian institutions’ total trading volume in U.S. Treasury securities more than doubled from 2007 to 2008 to $30 billion. In addition, use of Maple bonds has been growing, albeit with a recent slowdown in new issuance owing to investor hesitancy about some foreign credits.
Asset-backed securities trading volume tumbled more than 70% to just $17 billion in 2007-2008 and some Canadian institutions suggest that the difficulties in ABS are far from over. Asked to pick the single issue that will most affect fixed-income markets over the next 12 to 24 months, several institutions participating in the study cite the “meltdown in ABCP” and its effect on the broader fixed-income market and on spreads.
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MacLean Joins Aon
Matt MacLean has joined the Halifax operations of Aon Consulting as a senior consultant.
While working mainly in the health and benefits practice, he will also be involved in the investment consulting practice.
MacLean brings to his position more than 10 years of benefits consulting experience and has played a key role in servicing major accounts throughout Atlantic Canada during his career.
Last year, he received a master in business administration from Dalhousie University. MacLean also has a bachelor of business administration from Cape Breton University and a bachelor of science from Acadia University.