Investment Managers Grow Bearish on Canadian Stocks

    Over 75% of managers still expect positive returns in 2008 - despite
    increased pessimism over sub-prime credit crunch implications

    TORONTO, Dec. 31 /CNW/ - According to the latest Russell Investment
Manager Outlook, bullishness towards Canadian broad market equities has
dropped from 42% of managers to just 28%. As a result, bears now dominate
opinion for the first time in several quarters in the report by Russell
    Even with the increase in bearishness, 77% of investment managers still
expect Canadian equities to post flat to positive returns in 2008.
    "It seems that many managers are cautiously waiting to see how the
sub-prime credit crunch and rumours of a US recession will unfold, while at
the same time betting that the Canadian market will be in a position to move
ahead over the next 12 months," says Timothy Hicks, Chief Investment Officer,
Russell Investments Canada.
    "In our opinion, the current spate of negative sentiment in the market is
fueled at least as much by a sense of uncertainty as by any serious
deterioration of economic fundamentals. Over the coming quarters, the true
dimensions of the sub-prime credit crunch will be revealed, and market
watchers will have a clearer picture of whether we are indeed facing the
possibility of an economic contraction, or merely a slower pace of growth."
    Sub-prime lending woes and troubling economic indicators have triggered a
decline in bullishness towards equities among Canadian investment managers.
However, bullishness towards Canadian fixed income rose, indicating that many
managers believe bonds have found a level of support following the sharp
correction of earlier in the year. Bullishness towards Canadian bonds
increased from only 15% of managers to a full 39% on the heels of a sharp
correction earlier this year.
    As ground zero of the credit crunch, bearishness for US equities has
grown in number from 27% to 42%. After a lengthy stint as managers' most
favoured market, bullishness towards EAFE equities plummeted from 67% to 37%,
and the number expressing optimism for emerging markets fell from 52% to 43%.
    "The shift to a more bearish stance on equities comes amid not only the
credit crunch, but also a string of negative indicators. This includes
evidence of a slowing global economy, downward earnings growth revisions in
both Canada and the US, and a diminished corporate profit picture. Despite
aggressive measures by central banks to cut key lending rates and inject
liquidity into the market, investment managers appear to be approaching the
market with caution," says Hicks.

    Additional key findings from the Russell Investment Manager Outlook

    Canadian Sectors

    -   Bullishness towards Information Technology slipped from 72% to 50%.

    -   Bullish sentiment towards Industrials dropped from 54% to just 29%
        amid fears that a general economic slowdown would impact the
        railways, manufacturing and construction companies in this sector.

    -   Bearish sentiment towards Materials up-ticked from 36% last quarter
        to 45% in the latest survey.

    -   Bearishness rose nine points in the Telecom sector, from 28% to 37%.
        One of the most significant issues facing Canadian telecom providers
        is the spectre of foreign competition in the wireless space. With the
        Canadian industry already running high costs relative to the global
        market, the likelihood of lower data and call rates in a truly
        competitive domestic market are cause for concern.

    -   Energy remains a divisive sector with 43% of managers bullish and 33%
        bearish. A slight increase in bearishness this quarter may be the
        result of lower energy demand due to a higher Canadian dollar and
        higher energy costs due to Alberta's decision to sharply increase
        provincial royalties.

    Canadian Small Cap Stocks

    -   The outlook is a bit more severe for Canadian small cap stocks, with
        bulls plummeting from 36% to 19%, and bears shooting up from 39% to

    -   This is likely a reflection of smaller companies' greater
        vulnerability during a general economic slowdown, combined with the
        fact that many of Canada's exporters are smaller companies with
        heightened sensitivity to the strong Loonie.

    Canadian Fixed Income

    -   High-yield bonds, which have been dramatically revalued in recent
        months, have gone from a highly negative 72% bearish outlook to a
        more moderate 58%, suggesting that investment managers are now
        finding attractive valuations on a selective basis.

    -   This more bullish stance on bonds comes as sentiment towards the
        Canadian dollar settles at 23% bullish and 34% bearish--hinting that
        a number of managers believe the currency has found equilibrium at
        current levels.

    US Equities

    -   In the US, the falling dollar has been a boon to American exporters.
        Nonetheless, the bulls have been reduced from 52% to 42%, and the
        bears have grown in number from 27% to 42%.

    Overseas Equities

    -   Favour for EAFE equities have dropped back in line. Bullish sentiment
        plummeted from 67% to 37%.

    -   This could represent an overall recalibration of risk perceptions by
        the market, and also the squeeze that a falling US dollar has placed
        on many Eurozone exporters.

    Emerging Markets

    -   Bullishness towards emerging markets was also knocked back a few
        points, from 52% to 43%.

    -   Emerging markets are home to many basic industries, and are prone to
        feeling the impact of a broad economic slowdown.

    Detailed results and analysis from the Russell Investment Manager Outlook
are available on

    About Russell Investment Manager Outlook

    Russell Investments conducted the Russell Investment Manager Outlook
survey between November 26th to December 11th, 2007. The survey was sent to
investment managers with a variety of investment focuses. Having a financial
relationship with Russell was not part of the criteria for being included in
the survey.
    In total, 34 investment management firms and 44 investment managers from
Canada participated in the survey. The large majority of individual
respondents to the Russell Investment Manager Outlook have senior-level
investment decision responsibilities, and are often portfolio managers. Other
participants included investment strategists, research analysts and others.
The manager research that Russell Investments conducts for investment purposes
is done entirely independent of Russell Investment Manager Outlook, and
responses to the survey are on a purely voluntary basis.

    About Russell Investments

    Russell Investments is a global leader in multi-manager investing and one
of the world leaders in investment consulting. Russell Investments advises
institutional clients with total assets of over C$2.0 trillion and manages
approximately C$229 billion in its investment management business.
    Russell Investments supports its global operations by monitoring more
than 4,000 manager firms and their 8,600 products.
    Russell Investments serves institutional and individual investors with a
full range of investment services, including investment consulting, investment
funds which include private equity and hedge funds, transition management, and
stock indexes. Founded in 1936, Russell Investments has its headquarters in
Tacoma, Washington, USA and has principal offices in Toronto, New York,
London, Paris, Sydney, Singapore, Auckland, and Tokyo. Russell Investments
Canada Limited is a wholly-owned subsidiary of Frank Russell Company. For more
information, please go to
    Russell Investment Group is a registered trade name of Frank Russell
Company, a Washington, USA corporation. It operates in Canada through its
subsidiary Russell Investments Canada Limited. Frank Russell Company is a
subsidiary of The Northwestern Mutual Life Insurance Company.

    Commissions, trailing commissions, management fees and expenses all may
be associated with mutual fund investments. Please read the prospectus before
investing. Mutual funds are not guaranteed, their values change frequently and
past performance may not be repeated.

    Nothing is this publication is intended to constitute legal, tax
securities or investment advice, nor an opinion regarding the appropriateness
of any investment, nor a solicitation of any type. This is a publication of
Russell Investments Canada Limited and has been prepared solely for
information purposes. It is made available on an "as is" basis. Russell
Investments Canada Limited does not make any warranty or representation
regarding the information.

    Copyright (C) Russell Investments Canada Limited 2007

For further information:

For further information: Thien Huynh, (416) 992-2766; Katita Stark,
(416) 929-9100

Organization Profile

Russell Investments Canada Limited

More on this organization

Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890