Alan Ferguson
Province

Wordy explanations of the credit crunch that has brought the western world to the brink of a meltdown might fool you into thinking it’s all very complicated.

But the only unexplained phenomenon is how an advanced economy like that of the U.S. could have allowed its financial integrity to be undermined by an orgy of unregulated greed.

It’s only a decade or so since the Savings and Loan scandal in the U.S. bilked thousands of small investors out of their life savings.

This time, it’s the exploitation by the financial elite of gullible, wannabe homeowners.

In a booming economy, people on the fringes of society were cruelly encouraged to aspire to a dream of home ownership they could ill afford.

Lenders, eager to squeeze every last cent from the real-estate bonanza, paid a criminal lack of heed to the ability of their clients to pay. They offered so-called subprime mortgages whose initial, tempting terms were hard to refuse.

But, unlike in Canada, where mortgages generally stay with the institution issuing them, in the U.S. they were passed around like hot potatoes at a barbecue.

Wall Street brokers bought them wholesale, to be parcelled out in job lots for global investors scenting a high return.

Neither the identities of the original mortgagees, nor their ability to pay, were spared a thought. As long as the money kept coming, who cared? It seems to have occurred to very few people that even a minor hike in interest rates would topple this house of cards.

Wall Street financiers seemed oblivious to the risks, and kept flogging the mortgage bonds long after their weaknesses should have been apparent.

Investors who bought them were equally stunned to suddenly find themselves out millions, holding worthless paper.

A few smart guys saw what was coming and made small fortunes betting against the misplaced optimism. Their profits, legal enough, are nevertheless tainted with the misery of those now facing ruin.

With the U.S. housing boom now a bust, prices are tumbling and thousands of low-income owners face foreclosure.

They will be turfed on the orders of faceless, nameless officials in cities perhaps thousands of miles away, still owing money they don’t have.

The fallout from this folly is spreading around the world, with financial markets reeling like a drunk.

Money that could be borrowed for a song a few months ago now is hard to come by.

Canada‘s central bank is just one among many having to pour millions into the system to try to stem the panic.

The good news for Canada is that, for now, our housing market is showing resistance to the downward spiral in the U.S.

In fact, both prices and sales are projected to keep rising.

But I’d be very leery of anyone who says: “Have I got a mortgage deal for you.”

© The Vancouver Province 2007

 

Province

MONTREAL — Renewing a passport has become much simpler for Canadians.

Applicants no longer need to submit citizenship documents, supplementary identification or a guarantor declaration.

To qualify for the streamlined process, applicants must hold a Canadian passport issued after Jan. 31, 2002, that has not been altered or damaged, or reported as lost or stolen. Applicants must be Canadian residents. Other restrictions also apply.

The measure is to help to cut down on the backlog that has been mounting since new travel rules were introduced by the U.S. in January.

Since Jan 23, air travellers heading to or from the United States are required to carry a passport.

The passport requirement has been a growing source of tension between Ottawa and Washington, with the Conservative government complaining the Bush administration rushed to implement the plan before putting the proper infrastructure in place.

For more information about the new application process, visit www.passportcanada.gc.ca or call 1-800-567-6868.

© The Vancouver Province 2007

 

Economists entertain possibility of consumer-led recession

Province

TORONTO — The Toronto Stock Exchange’s subprime-related slump reached a full week yesterday, as signs emerged that the shrinking availability of credit is impacting the general economy.

The S&P/TSX Composite Index fell 193.86 points, or 1.5 per cent, to 13,048.76. As has been common lately, it sustained most of its losses late in the afternoon. This overall benchmark for the TSX, as of yesterday, was down almost 11 per cent from its record close of 14,625.76 on July 19 — less than a month ago.

The S&P/TSX Venture Composite Index is proportionally worse. This index, dominated by junior mining companies, was down 123.76 points, or 4.4 per cent, to 2,660.84. That put it down 21 per cent from its record of 3,369.79 on May 7.

The dollar lost another good chunk of its value. It closed at 92.78 cents US, down almost a cent from 93.75 on Tuesday. A week earlier, it was within a nickel of parity with the U.S. greenback, closing at 95.36 cents US on Aug. 8.

U.S. markets were also down. The Dow Jones Industrials fell 167.45 points, or 1.3 per cent, to 12,861.47. The Nasdaq Composite Index was down 40.29 points, or 1.6 per cent, to 2,458.83 while the S&P 500 Index dropped 19.84 points, or 1.4 per cent, to 1,406.70.

Weeks ago, financial stocks were taking the brunt of subprime worries, but yesterday, this sector got off relatively lightly. Declines, particularly in mining and materials, were indicative of worries that the ongoing credit crisis will impact global economies in such a way that could have an impact on demand for an array of products and services.

“[The credit crunch] does have macroeconomic implications,” said Michael Sprung, president of Sprung and Co. Investment Counsel Inc. in Toronto. “For the first time, we’re beginning to see some economists, namely Merrill Lynch, talking about the possibility of a consumer-led recession [in the U.S.] If there’s a consumer-led recession in the U.S., it’s bound to have a spillover effect into Canada.”

The TSX metals and mining index was down 3.6 per cent. This included a fall of 96 cents, or 7.6 per cent, to $11.62 in the stock of Ivanhoe Mines Ltd. Sherritt International Corp. was down 85 cents, or 5.9 per cent, to $13.50.

The materials index didn’t fare much better, losing 3.4 per cent. This factored in the stock of Potash Corporation of Saskatchewan Inc., the world’s biggest fertilizer producer, which fell $5.40, or 5.9 per cent, to $86.20. Also, Shore Gold Inc. declined 72 cents, or 17.9 per cent, to $3.30.

© The Vancouver Province 2007

 

Chris Hawley
USA Today

AJIJIC, Mexico — After Jean Douglas turned 70, she realized she couldn’t take care of herself anymore. Her knees were giving out, and winters in Bandon, Ore., were getting harder to bear alone.

Douglas was shocked by the high cost and impersonal care at assisted-living facilities near her home. After searching the Internet for other options, she joined a small but steadily growing number of Americans who are moving across the border to nursing homes in Mexico, where the sun is bright and the living is cheap.

For $1,300 a month — a quarter of what an average nursing home costs in Oregon — Douglas gets a studio apartment, three meals a day, laundry and cleaning service, and 24-hour care from an attentive staff, many of whom speak English. She wakes up every morning next to a glimmering mountain lake, and the average annual high temperature is a toasty 79 degrees.

“It is paradise,” says Douglas, 74. “If you need help living or coping, this is the place to be. I don’t know that there is such a thing back (in the USA), and certainly not for this amount of money.”

As millions of baby boomers reach retirement age and U.S. health care costs soar, Mexican nursing home managers expect more American seniors to head south in coming years. Mexico‘s proximity to the USA, low labor costs and warm climate make it attractive, although residents caution that quality of care varies greatly in an industry that is just getting off the ground here.

An estimated 40,000 to 80,000 American retirees already live in Mexico, many of them in enclaves like San Miguel de Allende or the Chapala area, says David Warner, a University of Texas public affairs professor who has studied the phenomenon. There are no reliable data on how many are living in nursing homes, but at least five such facilities are on Lake Chapala alone.

“You can barely afford to live in the United States anymore,” said Harry Kislevitz, 78, of New York City. A stroke victim, he moved to a convalescent home on the lake’s shore two years ago and credits the staff with helping him recover his speech and ability to walk.

“Here you see the birds, you smell the air, and it’s delicious,” Kislevitz said. “You feel like living.”

Many expatriates are Americans or Europeans who retired here years ago and are now becoming more frail. Others are not quite ready for a nursing home but are exploring options such as in-home health care services, which can provide Mexican nurses at a fraction of U.S. prices.

“As long as the economies of the United States and Europe continue to be strong, we’re going to see people coming here to Latin America to pass their final days,” said Oscar Cano, manager of Apoyo a los Miguelenses Ancianos, a non-profit group that runs a nursing home in San Miguel de Allende.

Cozy cottage, meals, health care

Retirement homes are relatively new in Mexico, where the aging usually live with family. There is little government regulation. Some places have suddenly gone bankrupt, forcing American residents to move. Some Mexican homes have rough edges, such as peeling paint or frayed sofas, that would turn off many Americans.

“I don’t think they’re for everyone,” said Thomas Kessler, whose mother suffers from manic depression and lives at a home in Ajijic. “But basically, they’ve kept our family finances from falling off a cliff.”

Residents such as Richard Slater say they are happy in Mexico. Slater came to Lake Chapala four years ago and now lives in his own cottage at the Casa de Ancianos, surrounded by purple bougainvillea and pomegranate trees.

He has plenty of room for his two dogs and has a little patio that he shares with three other American residents. He gets 24-hour nursing care and three meals a day, cooked in a homey kitchen and served in a sun-washed dining room. His cottage has a living room, bedroom, kitchenette, bathroom and a walk-in closet.

For this Slater pays $550 a month, less than one-tenth of the going rate back home in Las Vegas. For another $140 a year, he gets full medical coverage from the Mexican government, including all his medicine and insulin for diabetes.

“This would all cost me a fortune in the United States,” said Slater, a 65-year-old retired headwaiter.

On a recent afternoon, lunch at the Casa de Ancianos consisted of vegetable soup, beet salad, Spanish rice, baked dogfish stuffed with peppers, garlic bread and a choice of four cakes and two Jell-O salads. Slater’s neighbor doesn’t like Mexican food, so a nursing home employee cooks whatever she wants on a stove beside her bed.

Like many retirees, Slater has satellite television, so he doesn’t miss any American news or programs. When he wants to see a movie or go shopping downtown, the taxi ride is only $2-$3. Guadalajara, a culturally rich city of 4 million people, is just 30 miles away.

For medical care, Slater relies on the Mexican Social Security Institute, or IMSS, which runs clinics and hospitals nationwide and allows foreigners to enroll in its program even if they never worked in Mexico or paid taxes to support the system. He recently had gallbladder surgery in an IMSS hospital in Guadalajara, and he paid nothing.

Many of the nursing home employees speak English, and so does Slater’s doctor.

The Casa de Ancianos began taking in foreigners in 2000 as part of an effort to raise extra money, director Marlene Dunham said. It built the cottages especially for the Americans and uses the income received from them to subsidize the costs of the 20 Mexican residents at the home.

The program was so successful that the nursing home has plans for 12 more cottages, a swimming pool, a Jacuzzi and a gazebo with picnic area. The nursing home now advertises on the Internet and through pamphlets distributed in town. Some U.S. companies have also begun investing in assisted-living facilities in Mexico, said Larry Minnix, president of the American Association of Homes and Services for the Aging, which represents 5,800 nursing homes and related services.

However, Minnix cautioned that lax government regulation poses dangers at smaller homes.

“It’s the same danger you have of going across the border looking for cheap medications,” Minnix said. “If you don’t know what you’re getting, and you’re not getting it from people you trust, then you’ve got an accident waiting to happen.”

‘Nice place, but it’s lonesome’

Since many nursing homes are run out of private homes, regulation by state health departments is often spotty. Managers such as Beverly Ward of Casa Nostra and Maura Funes of El Paraiso, both in Ajijic, said that Mexican officials inspect them only once a year, unlike U.S. inspectors, who may visit a home several times a year.

The U.S. Embassy said it had no record of complaints against Mexican nursing homes, but some residents in the Lake Chapala area reported bad experiences at now-defunct homes.

The first home that Jean Douglas lived in after she moved from Oregon was staffed by “gossips and thieves,” she said. It went out of business.

Irene Chiara of Los Angeles also lived in a home that was shut down by Jalisco state authorities.

“It was filthy, and the food was very bad. It was all made in the microwave,” she said.

Some Mexican managers also underestimate the costs and difficulty of running a retirement home. Two hotels turned into assisted-living facilities, The Spa in San Miguel de Allende and The Melville in the Pacific Coast city of Mazatlán, recently abandoned the business, their managers said.

“It was very expensive to run it,” said Luis Terán, manager of The Melville.

Some managers said they were especially selective when admitting foreign residents, to make sure they’ll be able to pay. Medicare, Medicaid, the Department of Veterans Affairs and most U.S. insurance companies will not cover care or medicine as long as patients are outside the United States.

Some American residents said they had doubts about the quality of Mexican medical facilities and would go back to the United States if they became seriously ill. Jim May, 74, a resident of the Casa de Ancianos, said he recently decided to move to Texas to be closer to Veterans Affairs hospitals.

The language barrier can be daunting, and Mexican food can be very different, some residents said.

Some residents said they miss home and find it hard to make friends with Mexican residents. “It’s a very nice place, but it’s lonesome,” said Polly Coull, 99, of Seminole, Fla., a resident at Alicia’s Convalescent Nursing Home in Ajijic.

Mexican entrepreneurs are doing their best to prepare for a tide of Americans.

In the Baja Peninsula town of Ensenada, the Residencia Lourdes opened in 2003, offering care for patients with Alzheimer’s disease and senile dementia. The towns around Lake Chapala have at least five small retirement homes. Most of them opened in the last five years and house from one to 25 foreigners.

The largest, Alicia’s Convalescent Nursing Home, consists of four renovated homes, one of them specializing in stroke victims and another for Alzheimer’s patients. Prices range from $1,000 to $1,500 a month and include everything except medicine and adult diapers. The rooms are outfitted in Mexican style, with murals, hand-carved beds, arched ceilings lined with brick and individual patios.

In other American enclaves, in-home nursing services have sprung up to serve the retirees. In Rosarito, just south of the U.S. border, INCARE provides nursing aides to retirees starting at $8.33 an hour, less than half the cost of the same service in nearby San Diego.

Developers look to Mexico

Developers of “independent living” facilities for seniors are also beginning to look to Mexico. A Spanish-U.S. venture is building Sensara Vallarta, a 250-unit condominium complex aimed at Americans 50 and older in the Pacific Coast resort of Puerto Vallarta. And in the northern city of Monterrey, El Legado is marketing itself as a “home resort” for seniors.

Academics and government officials are beginning to take notice. In March, the University of Texas at Austin held a forum for developers, hospital officials, insurance companies and policymakers to discuss health care for retirees in Mexico.

“With the right facilities in place, Mexico could give (American retirees) a better quality of life at a better price than they could find in the United States,” says Flavio Olivieri, a member of Tijuana‘s Economic Development Council, which is seeking funding from Mexico‘s federal government to build more retirement homes. “We think this could be a very good business as these baby boomers reach retirement age,” he says.

Chartwell, Terrace bar, restaurant to be replaced by ‘smoking hot’ atmosphere

Bruce Constantineau
Sun

Four Seasons Hotels will spend $5.3 million over the next few months on renovations to its iconic downtown Vancouver property meant to create a “buzz” among city foodies and barflies.

Venerable Chartwell will close as a public restaurant in November while the Garden Terrace restaurant and Terrace bar have already shut down for good.

In their place, hotel general manager Guy Rigby says patrons will experience a destination restaurant and bar with a “smoking hot” atmosphere.

“This won’t be a typical hotel dining room anymore,” he said in an interview Monday. “A perfect dining experience now involves a tremendous amount of drama, activity and atmosphere. It doesn’t require a tie because it’s a little less formal.”

Work on the $4.3-million second-floor renovation project — including the 6,750-square-foot restaurant/bar area and 5,000-square-foot lobby — began three weeks ago and is scheduled for completion in November.

Another $1 million will be spent between January and March next year on renovations to the lower lobby and driveway.

The yet-to-be-named restaurant and bar will feature an open kitchen and a bar set against a backdrop of a “green” wall of live foliage. Other focal points include Ottoman lounge chairs near a fireplace, an interactive kitchen counter/bar and various dining options — including a communal table and intimate dining booths.

The restaurant will also house an exclusive glass-enclosed private dining room with sketched images of coastal mountain scenes.

Rigby expects the multi-zone facility will become a “must” place to drink and dine because it will be crowded and “very exciting.

“A great restaurant is the window through which people see our hotel,” he said. “When you put buzz into your food and beverage, people want to be there.”

The new contemporary design was created by San Francisco-based Engstrom Design Group, which redesigned Four Seasons restaurant properties in Las Vegas and Hawaii.

Executive chef Rafael Gonzalez, formerly executive sous chef at The Pierre hotel in New York, will create the new restaurant’s menu.

Rigby said Chartwell will become a private dining room when the new restaurant opens in November.

Work on the second-floor lobby area includes a new terrazzo floor with area rugs, new furnishings and a new front desk. The lower-level lobby will get new artwork and a new ceiling with hanging lanterns while the driveway will receive updated lighting and ceiling work.

Rigby also noted a significant capital investment will begin by the fall of 2008, when work begins on renovating all 372 guest rooms and suites — a project expected to finish by the spring of 2009.

He said hotel officials are also discussing the possibility of opening a spa in the hotel, something considered a must at most upscale properties.

Physical limitations of its building caused the Four Seasons to lose its prestigious five-diamond rating from the influential American Automobile Association four years ago.

The AAA cited several reasons for the downgrade — including the dated appearance of the hotel’s lower lobby, no spa facility and no separate showers and bathtubs in all guest rooms.

Rigby said he doesn’t stay awake nights hoping the current and future upgrades give the hotel its five-diamond rating back.

The Pan Pacific and Sutton Place hotels are the only two five-diamond properties in Vancouver.

“It’s nice to be a five-diamond hotel but the most important thing is that we carry the Four Seasons brand and our staff offers guests the best service experience in the city,” he said.

“By the time we’ve renovated the hotel, we’ll have a room product that will compete with anybody in the city and, in my opinion, we’ll have the most exciting and innovative restaurant in the city. There will be nothing like this.”

© The Vancouver Sun 2007

 

Derek Moscato
Province

The Vancouver tourist trade is in full swing — and out-of-towners are on the move, enjoying our region’s rich assortment of parks, parades and panhandler encounters.

Along with the tour bus crowds and cruiseship passengers, convention goers are a huge part of this visitor influx, pumping serious bucks into the B.C. economy.

Remember when the Shriners held their annual get-together a few summers back? In addition to the upswing in shopping and dining, downtown was awash with colourful hats and clowns, bringing smiles to the faces of many.

But British Columbians aren’t so amused with the convention industry as a whole these days. Word that the price tag to build the Vancouver Convention and Exhibition Centre expansion has soared from $495 million to nearly $900 million is troubling, indeed. And it has some naysayers, such as the

Canadian Taxpayers Federation, treating the huge waterfront development like this summer’s blockbuster boondoggle — on a scale with B.C.’s fast ferries, which continue to waste away on the opposite side of Burrard Inlet.

The ramped-up rhetoric against this massive project, however, is both over-the-top and unfair.

That’s because, unlike the dead-on-arrival fast ferries, there’s still a business case to be made for an expanded convention facility here.

Locals need look no farther than Expo 86 for proof that higher-than-expected costs don’t have to translate into financial Armageddon.

The world’s fair was plagued by a serious budget overrun. But eventually it won the public over, thanks to successful staging of the event and the flow of investment dollars into B.C. that followed.

Like Expo, the new convention centre can give trade and tourism here a significant boost — as has been shown in other world cities.

San Francisco‘s Moscone Centre, for example, is famous not only for its international gatherings, but also for boosting the profile of the Bay Area’s homegrown technology companies through world-famous events like the Macworld Expo.

And while these are apparently volatile times for the global convention business, it would be wrong to write off the industry as dying or dead.

In Boston, convention business has been so brisk at its three-year-old convention centre, which cost $800 million US to build, that the Massachusetts Convention

Centre Authority now wants to expand its exhibition space by 50 per cent.

Earlier this decade, Bostonians too moaned about soaring costs and dicey future prospects for the mammoth building near the south Boston waterfront.

Today, they’re competing with the New Yorks and Londons on the world stage.

So instead of focusing on a nearly decade-old ferries fiasco, Vancouver‘s convention centre boobirds would be wise to look to New Englanders and Californians for inspiration — before the trash talk in this city takes the lustre off our waterfront showpiece for good.

© The Vancouver Province 2007

Anne Howland
Sun

Financial markets might be too preoccupied this week with the ongoing sub-prime saga to pay much heed to several bits of economic data, particularly from the United States.

“There’s a flood of U.S. data next week but it won’t be enough to catch the attention of the markets,” said Avery Shenfeld, senior economist at CIBC World Markets.

“Realistically, it will take a lot” to turn the markets’ attention away from their focus on liquidity concerns, said Douglas Porter, deputy chief economist at BMO Capital Markets.

On Friday, central banks around the world — including the Bank of Canada — moved to inject short-term money into the financial system in an effort to calm markets spooked by the meltdown in the U.S. sub-prime lending market and ensuing fears of a credit crunch.

In Canada, the only notable economic release next week will be the merchandise trade balance for June on Tuesday. Shenfeld said he expects a smaller, yet healthy, surplus.

Statistics Canada reported last month that Canadian merchandise imports and exports declined in May for the second consecutive month after both reached record levels in March. The nation’s trade balance with the world remained little changed at $5.9 billion, as imports and exports fell by nearly the same value, it added.

The trade report will be “interesting,” Porter added, “but it doesn’t hold a candle to what’s troubling the markets now.”

In the U.S., retail sales figures for July will be released today, and Porter said the data will be important because it will give an indication of the health of consumers. Shenfeld said he expects the sales figures to be disappointing.

On Wednesday, the U.S. consumer price index for July will be released, which “could catch the market,” said Porter. The CPI figure “should be roughly on trend,” added Shenfeld. On Thursday, housing starts in the U.S. could also roil markets already concerned with the health of the housing market, especially if the numbers are weak, Porter said.

“I don’t want to completely dismiss the data,” he added, but the markets’ focus will likely remain firmly on any further surprises from the sub-prime sector and on whether the liquidity squeeze continues.

“One major story is how calm the Canadian dollar has been” in the face of falling markets, said Porter. The loonie is usually among the first of the currencies to be affected by financial turmoil, but its recent steadiness reflects Canada‘s improved fundamentals, he added.

On Friday, the dollar rose after Statistics Canada reported that the unemployment rate fell to its lowest since 1974, boosting expectations that economic expansion will continue. It closed at 94.92 cents US.

© The Vancouver Sun 2007

 

Sun

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Crisis could push interest rates down

Paul Vieira
Sun

Central banks in Europe and North America intervened Thursday to inject tens of billions of dollars into financial markets to alleviate a cash crunch — a move analysts suggest may affect pending decisions on interest rates.

The central banks’ initiative was meant to reassure traders over credit concerns resulting from a meltdown in the U.S. sub-prime mortgage market.

But traders were anything but reassured.

The blue-chip stock index in Toronto plummeted 280.18 points to its lowest level in more than three months, and the Dow Jones Industrial Average in New York fell a stunning 387.18 points, or 2.8 per cent; the Canadian dollar lost nearly a cent in value, closing at 94.65 cents US; gold futures for December delivery shed more than $13 US an ounce; and base metal prices, led by nickel and copper, tumbled amid concern of tightening demand.

The cash injection was spurred by news that BNP Paribas, France‘s largest bank, had to shut down three investment funds because of their exposure to U.S. subprime mortgages. This, in turn, drove up borrowing rates on the overnight lending market, where financial institutions buy and sell funds to meet reserve requirements, to levels well above the central banks’ target rates indicating there were insufficient funds to meet lenders’ demands.

The European Central Bank intervened, adding almost 95 billion euros ($138 billion Cdn.) to the system in an effort to dampen upward pressure on overnight rates. The U.S. Federal Reserve followed, with a $24-billion US injection. The Bank of Canada, through the buyback of government of Canada securities, added an extra $1.64 billion.

A spokesman for the Ottawa-based bank said the buyback was part of normal operations, but acknowledged the amount of cash injected represented a big increase from previous days’ activities. In contrast, the Bank of Canada injected $663 million into the market on Aug. 2 and $410 million on Aug. 7.

Some analysts said this suggests the subprime meltdown could put pressure on David Dodge, the central bank’s governor, when he decides on interest rates. It was widely expected that the bank would raise its benchmark rate by another 25 basis points on Sept. 5 to keep inflation in check, but some are now thinking the rate may stay put at 4.5 per cent, or even be lowered.

“If conditions sour enough, and the spillover of the U.S. subprime situation to the overall economy is more significant than thought, then the Bank of Canada might be willing to act on the interest rate front,” said Marc Levesque, chief economics strategist at Toronto-Dominion Bank.

Ted Carmichael, chief Canadian economist at JP Morgan Chase Canada, said the sub-prime fallout has thrown a “wild card” into the Bank of Canada’s decision-making process.

“This is very much an hour-to-hour, day-to-day, week-to-week situation,” the economist said. “It is something that if it proves temporary, the Bank of Canada’s decision won’t be affected. However, if it something is a lasting problem — where we will have problems with the overnight market on a daily basis — it could clearly affect the bank.”

Bank freezes funds

PARIS — France’s biggest-listed bank, BNP Paribas, froze 1.6 billion euros ($2.3 billion Cdn) worth of funds on Thursday, citing the U.S. sub-prime mortgage sector woes that have rattled financial markets worldwide. The frozen funds amount to less than 0.5 per cent of funds under management for the euro-zone’s second biggest bank by value, but later in the day, a separate European fund valued at 750 million euros was frozen too, and a Dutch bank pulled its planned new listing after suffering sub-prime losses.

 

© The Vancouver Sun 2007

Selloff blamed on meltdown

Province

TORONTO — The Toronto Stock Exchange’s main index closed at its lowest level in more than three months yesterday as intensifying concerns over global credit markets sparked a broad selloff that was led by banks.

The S&P/TSX composite index closed down 280.18 points, or more than two per cent, at 13,478.01, after gaining nearly 200 points the day before.

Banks, which led all equities higher on Wednesday, reversed course sharply as worries over lending markets rose.

Several major U.S. financial institutions reported losses while BNP Paribas, France‘s biggest listed bank, froze $2.2 billion US worth of funds. In each case, blame fell on the meltdown in the U.S. subprime-mortgage sector and investors responded by liquidating equities on European and North American markets.

“I don’t think we know the size and scope of the mortgage-loan situation, so therefore we get a wild day like this where it just goes nowhere but down,” said Adrian Mastracci, portfolio manager and president at KCM Wealth Management Inc. in Vancouver.

“It doesn’t matter what boat you’re in — Canada or the U.S., you get tarred with the same brush . . . but I’m not ready to call this a bear market quite yet.”

The TSX financials sector, which represents about a third of the overall index, fell 2.7 per cent to log its steepest decline of the year.

The two biggest weighted losers were Royal Bank of Canada , down $1.69, or three per cent, at $53.65, and Toronto-Dominion Bank, off $2.77, or 3.9 per cent, at $67.98.

Manulife Financial, which reported strong quarterly earnings and surged the day before, sagged 72 cents, or 1.8 per cent, to $40.03.

The latest lending-market scare prompted central banks to step in with soothing words and injections of money. The Bank of Canada said yesterday it had injected a larger than normal $1.64 billion into money markets to meet liquidity needs.

But stocks plunged across the board with a drop of more than one per cent in all but three sectors — utilities, consumer staples and consumer discretionary.

“People are concerned that this is a market that is going to fall precipitously further, but we were long in the tooth for this correction,” said Peter Chandler, senior vice-president at Canaccord Capital in Waterloo, Ont.

“I think what we can look forward to is a very choppy, volatile market for a couple of months with violent moves like we saw today to both the downside and the upside,” he said.

The benchmark index has fallen in nine of 14 sessions and has lost more than 7.8 per cent since July 19, when it touched a record peak of 14,646.82.

Market volume yesterday was a heavy 462 million shares worth nearly $10 billion. Decliners outpaced advancers 1,202 to 452. The blue chip S&P/TSX 60 index closed 17.85 points, or 2.25 percent, lower at 775.58.

South of the border, the Dow Jones industrial average tumbled 387.18 points, or 2.83 per cent, to close at 13,270.68, its steepest drop since February. The Nasdaq Composite Index sank 56.49 points, or 2.16 per cent, to close at 2,556.49.

© The Vancouver Province 2007