Canada’s resources sector overtakes financials on S&P/TSX Composite Index

Natural resources has become the largest single sector on the main equity index in Canada, having overtaken financials on the back of soaring oil and metals prices and a global banking slump.

Energy and materials companies now constitute about 31.07% of the S&P/TSX Composite Index, while Canada’s banks, insurers and asset managers have a 30.9% weighting.

“It’s good news for the TSX,” said the chief investment officer at Purpose Investments, Greg Taylor. “The energy companies that survived the days of ESG are coming out with better balance sheets and as much better operators, and they’re set up to do really well in this high commodity price environment.”

Pipeline giant Enbridge, which has gained 18% this year, has the third largest weighting on the benchmark, while Canadian Natural Resources ranks in sixth place.

Increasing demand for oil and metals in the post-COVID climate has pushed prices to record highs with global inventories for the likes of oil and gas, copper and coal stooping to record lows. Meanwhile, the financial sector has struggled while central banks aggressively tighten monetary policy to temper surging inflation.

The S&P/TSX Energy Sector Index has rallied 34% this year, along with the S&P/TSX Materials Index which has climbed 26%. On the other hand, financials have dropped 1.4%. Copper miner Turquoise Hill Resources and oil and gas producer Vermilion Energy are leading gains on the benchmark, soaring 79% and 73% respectively this year.