For investors, Canada’s 2021 federal election poses a more than usual amount of uncertainty.
Ever since Justin Trudeau pulled the writ down in mid-August, there has been a lot of political rhetoric from various parties, but according to market strategists, it hasn’t moved the markets for the most part so far, because Investors consider various possible election outcomes. Stock valuations, however – especially in regulated economic sectors such as energy, financial services, real estate and telecommunications – could see some significant changes when the results of Monday’s vote become clear.
“The market rarely pays the price in election promises,” said Jean-François Perrault, director of financial and provincial economics and chief economist at the Bank of Nova Scotia, in a report last week. Investors are following “a wait-and-see approach…” in terms of expected minority wins.
As polling day approaches, Bay Street strategists are modeling two scenarios—a second liberal minority government or a conservative minority—that have distinct winners and losers in Corporate Canada. For example, natural gas producers and pipeline companies would be expected to prosper under the Conservatives, while facing increasing adversity if the Liberals returned to power.
Canada’s 2021 federal election platform guide: Compare where the parties stand on top issues
Market analysts are also weighing what the alliance will mean for the markets. “NDPs have enough lead on the bloc at this point that they can be decisive in determining who forms the government,” said Avery Schenfeld, chief economist at CIBC World Markets. “So it’s worth taking at least a look at the NDP platform to decide what some of their top priorities might be.”
Here’s how four key sectors of Canada’s economy – energy, financial services, real estate, telecommunications – are expected to respond to a liberal or conservative minority government.
The Bank of Nova Scotia’s 50-page report on what the election will mean for stock prices devoted 25 percent to the outlook for energy stocks. Each political party made tackling climate change a central part of its platform, announcing policies that would shape the fate of oil and gas companies, utilities and renewable energy plays.
Energy analysts at Scotiabank said both liberals and conservatives remain committed to carbon pricing and net-zero initiatives. The parties split on the level of carbon tax rates and how quickly the industry is expected to reduce its carbon emissions. In general, Scotiabank said, re-electing a Liberal government is “negative” for the oil and gas industry, while “a conservative minority would be favorable to the energy and midstream industries.”
However, analysts said the new energy and environmental policies of any government – Liberal or Conservative – would be felt most acutely on oil sands producers, such as MEG Energy Corp., while those of natural gas-heavy producers such as Tourmaline Oil Corp. approach will be promoted. and utilities that deliver gas to consumers.
The Scotiabank report said, “The companies most exposed – for good or bad – to these issues are in the oil sands, followed by integrated – which have all oil sands – conventional oil, and natural gas.” “A conservative-led government may be more supportive of natural gas, which may require additional infrastructure.” During the campaign, Conservative Leader Erin O’Toole also committed to building additional pipelines, such as Enbridge Inc.’s canceled Northern Gateway project.
For banks and insurance companies, this election translates into a potential $10-billion swing in profits.
During the campaign, the Liberals announced plans to raise taxes on large financial institutions and impose new fees, which the party called the “Canada Recovery Dividend”. Together, the levy is expected to raise $2.5 billion annually over the next four years. At the time, John Aiken, Barclays director of Canadian financial research, said: “This is a significant negative development for the earnings outlook for Canadian banks and insurance companies.”
There is no new corporate tax in the conservative platform. Mr. O’Toole announced consumer-friendly financial services policies, such as a review of banking fees and measures aimed at increasing competition from fintech companies for mortgages, credit and lines of credit cards.
Rising home prices – an all-time topic of conversation at every cocktail party – and housing affordability featured prominently in the election campaign.
According to Scotiabank real estate analyst Mario Saric, the Conservatives have pledged that, on their watch, builders will break ground on one million homes over the next three years, with construction activity increasing by 30 percent, while the Liberals are targeting 100,000 new Huh. home by 2025. If the home starts to grow significantly, it will boost the prospects of various public companies, including builders, lumber producers and service businesses such as Real Matters Inc. and First Service Corp.
High-growth owners, such as the $10 billion Canadian Apartment Properties Real Estate Investment Trust and many other large, publicly traded REITs, face potential tax increases if the Liberals return to power. In a report, Mr Sarik said that liberals have become a spotlight on real estate companies that the party says are “trying to grow Canada’s large portfolio of rental housing, putting rents upward pressure”. Huh.”
The election is underway because Rogers Communications Inc. In a bid to reshape the telecommunications landscape by acquiring Shaw Communications Inc. The $26 billion acquisition represented a rare display of unity among Canada’s major political parties, as each said the deal could only be approved if it upheld wireless competition.
Last week, Scotiabank telecommunications analyst Jeff Fan said: “Rogers and Shaw will have to introduce a merger measure that includes the split of Shaw Mobile/Freedom,” the country’s fourth-largest wireless carrier with more than two million customers. If the next government demands a sale of Freedom, industry players such as Quebecer Inc. and Cogeco Inc. will contend with private-equity funds for the prize.
Political leaders also agree that new rules are needed to level the playing field between global tech giants and traditional domestic players in Canadian media. “The process can be long and frustrating for all parties,” Mr Fan said. “The Conservatives’ platform demands less regulatory burden on traditional broadcasters and less fees and funding, which will be beneficial to traditional broadcasters such as Corus Entertainment Inc., BCE’s Bell Media and Rogers Media.”
If elected, the Conservatives say they plan to boost competition in telecommunications by lowering barriers for foreign players to service Canadian customers. Mr Fan said the policy change could have unforeseen consequences with a national platform such as Telus Communications Inc., potentially becoming an acquisition target for a large US telecommunications company.
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