It began appropriately enough on Friday, Oct 13, on Wall Street in New York when skittish investors began a panic sell-off after financing snags appeared in the United Airlines buyout deal.
It might not be immediately apparent what this has to do with Canadian markets, particularly Vancouver’s specialty niche as a venture capital centre. But analysts explain that the UAL deal sent shock waves through all equity markets as a significant percentage of recent stock market action is based on actual or potential takeovers.
Because so many of these deals are highly leveraged and financed by junk bonds, it led one industry observer to quip that the 1989 market crash signalled the end of the “pig market.”
Canadian markets, including Vancouver, suffered from the spillage. Market watcher Ian McAvity blamed it on the full moon, others on fears of a recession or inflation, and on residual nervousness from the October, 1987, crash.
The VSE Index plunged 44.78 points to 704.66 on Friday, the largest single-day drop since Oct 16, 1987, when it lost 126.89 points.
Despite some nail-biting over the weekend, the consensus among many brokers and industry watchers was that stocks would settle up on Monday.
“There were people who were concerned despite reassurances that conditions were not the same as October, 1987,” said Stephen Semeniuk, vice-president of research for Canarim Investment.
“There was a lot of volatility on Monday,” he said. “Despite warnings not to sell, that’s what some did anyway.”
But brokers also noted that not all investors were in a selling mood Monday morning and that many wanted to know what to buy. And buy they did, boosting the VSE Index to close up a modest 5.84 points to 710.49 by market close.
At presstime, market activity picked up considerably on news that Corona Corp. considered itself a front-runner to acquire Stikine Resources (VSE). The company had appointed Yorkton Securities as its agent to find a buyer. Stikine’s key asset is a 50% interest in the Eskay Creek gold/base metals project north of Stewart, B.C.
Shares in companies active in the region gained ground as a result of the announcement.
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