The initial wave of the stock market sell-off triggered by Brexit has passed, as Tuesday offered respite to unnerved investors.
But it's hard to imagine that's the end of it.
"Markets do not react instantly to momentous events; investors need time to understand ramifications, especially those contingent on policy responses," Ajay Rajadhyaksha, head of macro research at Barclays, said in a recent note.
Stock markets around the world rallied on Tuesday, clawing back a fair chunk of what was lost through two unruly trading sessions after Britain voted in favour of leaving the European Union.
"Markets are bouncing, and can bounce further but the clouds on the horizon are dark, and they're real," Kit Juckes, a strategist at Societe Generale, wrote on Tuesday.
"There's a pattern for Monday mornings to extend moves of the previous week before Tuesday sees everyone take stock."
Canadians taking stock might see some steep losses in their domestic equity holdings. The S&P/TSX composite is down by a relatively modest 2 per cent over the last three days since the referendum's results. But the benchmark's resilience is due in large part to the surge of demand for gold stocks, which have benefited from gold prices rising sharply as a perceived haven in a volatile market.
The 20 worst-performing stocks in the S&P/TSX composite since the Brexit vote reveals a concentration of companies with relatively high exposure to the U.K. and European markets, as well as those susceptible to global growth fears and declining yields.
At the top of the list is online gambling company Intertain Group Ltd., which has declined by almost 17 per cent in three days. The company announced a change in leadership this week, as its efforts to be acquired and relocate to the U.K. from Toronto faces new scrutiny as a result of Britain's potential exit from the world's largest trading bloc.
Cantor Fitzgerald analyst Ralph Garcea said in a note he does not expect Brexit to "deter bidders or a U.K. listing."
The two largest Canadian auto parts stocks, meanwhile, were both among the biggest losers of the last three days. Shares of Magna International Inc. and Linamar Corp. have declined by 14 per cent and 16 per cent respectively since the end of Thursday.
Adding to the strains on the negative pressures on the auto cycle, "the uncertainty from Brexit over the next few years will likely dampen consumer confidence in Europe and negatively impact new vehicle sales," BMO Nesbitt Burns analyst Peter Sklar said in a note, in which he downgraded both stocks.
Globally, the sell-off has largely targeted the financial sector, which is also well represented among domestic underperformers.
But it is not Canada's largest banks that have been targeted so much as life insurance providers, with three of the four largest Canadian lifeco stocks ranking in the bottom 20 of the composite since Thursday. Both a deteriorating macro backdrop and declining yields are bad for lifecos, on top of their direct revenue exposure to the British market.
Other companies on the list that generate a significant portion of their revenues in Europe and the U.K specifically include: CGI Group Inc., Canada's largest tech company; engineering firm WSP Global Inc.;. pharmaceutical company Concordia Healthcare Inc.; and Finning International, a Caterpillar-equipment dealer.
|Company||Ticker||3-Day Share Price Change (%)|
|Intertain Group Ltd.||IT-T||-16.93|
|Concordia Healthcare Corp.||CXR-T||-14.40|
|Magna International Inc.||MG-T||-14.12|
|Brookfield Business Partners LP||BBU.UN-T||-11.71|
|Finning International Inc.||FTT-T||-10.88|
|HudBay Minerals Inc.||HBM-T||-10.87|
|Colliers International Group Inc.||CIG-T||-9.72|
|First Quantum Minerals Ltd.||FM-T||-9.56|
|Manulife Financial Corp.||MFC-T||-9.45|
|Element Financial Corp.||EFN-T||-9.26|
|Canadian Energy Services & Technology Corp.||CEU-T||-8.17|
|CGI Group Inc.||GIB.A-T||-7.96|
|Valeant Pharmaceuticals International Inc.||VRX-T||-7.90|
|WSP Global Inc.||WSP-T||-7.90|
|Secure Energy Services Inc.||SES-T||-7.73|
|Industrial Alliance Insurance and Financial Services Inc.||IAG-T||-7.69|
|Sun Life Financial Inc.||SLF-T||-7.67|