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MARKET UPDATE, monday, 18th NOVEMBER, 2013:

By Musabbir Mazhar

The S&P/TSX composite index fell 24.5 points to end the day at 13,458.06 as resource shares fell due to weak commodity prices. Gold at the spot rate is at $1274.85, after falling to $1270.15 on Monday. The DJIA rose above 16,000 for the first time in its history while S&P 500 topped 1800. This happened as Janet Yellen indicated that she would keep the stimulus program of buying $85 billion of bonds per month ($40 billion mortgage bonds and $45 billion in Treasury securities) until the US economy is stronger. Janet Yellen is the nominee who will take over Fed as the Chairman as Ben Bernanke steps down. Charles Plosser, Federal Reserve Bank of Philadelphia President, commented that the Fed might need to set a final size for the QE program so that it can end it after reaching the amount.

China revealed its long-term economic reform. The one-child policy that was introduced in 1979 was relaxed – this had to be done at some point since the country has an aging population. A very important change was the easing of the hukou system. Under the system, the migrants had to leave the public jobs when they moved to urban cities – this reform will help the free movement of labor thus leading to urbanization faster. Furthermore, State-owned Enterprises (SOEs) will now be required by law to pay bigger dividends (30% of earnings from state capital has to be paid back to the state now). This rate was typically 5% to 20% in dividends earlier. Among other notable reforms – the Communist party of China (CPC) said China will now allow private capital to set up small and medium banks – this essentially opens up the banking sector wider. The IPO system has been changed – Now, the China Securities Regulatory Commission, the securities regulatory body will be responsible for ensuring companies’ disclosures are according to requirements instead of ‘approving’ the IPO.

Brent Crude fell as supply increases in the market as Saudi Arabia, the largest producer in the OPEC, exported more oil in September compared to any since November 2005. Brent is at 108.45 USD/bbl (Jan delivery) compared to Crude oil WTI at 92.82 USD/bbl at $15.63 spread. It can be expected that Brent prices would be lower next year as supply disruption tensions ease.

Fairfax Financial Holdings Ltd announced that it will buy a majority stake in Keg Restaurants Ltd, which is a privately owned company. Fairfax will own 51% while the CEO of Keg will own the remaining 49%. Keg Royalties Income Fund rose about 0.6% in the market and Fairfax fell to 426.88 (-0.2%).

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