a day ago
Make Canada Investable Again? Policy pivot seemed to do the trick for investors in June
At the beginning of June, economists at National Bank slapped a label on Prime Minister Mark Carney's business agenda. They called his approach MCIA, for Make Canada Investable Again.
'After years of trading at a discount to the U.S. – both at the index level and across most industries – the MCIA initiative aims to reposition Canada as a more attractive destination for both domestic and foreign private capital," said Stéfane Marion and Matthieu Arseneau, respectively the chief economist and deputy chief at National Bank NA-T in a report. 'In our view, this supports a narrowing of the S&P/TSX's valuation gap relative to the S&P 500.'
Call it MCIA, call it anti-MAGA, call it what you want. Investors spent the last month committing serious amounts of cash to stock sales that aligned with the policy objectives Mr. Carney stressed during the election campaign and Throne Speech in late May. Those themes including weaning the country from its dependence on energy exports to the United States and building stronger tech and defence industries.
There was also a boom in financings from gold and silver producers, showing investors want a hedge on U.S. President Donald Trump's potential to blow up the global economy or the U.S. bond market.
In June, Bay Street investment banks raised more than $3.5-billion in equity sales for Toronto Stock Exchange-listed companies, exceeding the $3.1-billion of stock offerings completed during the first five months of the year. Prior to June, the value of stock sales was down 54 per cent from the same period a year ago.
Pipeline operator Keyera Corp. KEY-T did much of the heavy listing. The Calgary-based company raised $2.1-billion by selling subscription receipts, tied to a major acquisition. The receipts become Keyera common shares when the utility closes the $5.15-billion purchase of a Canadian natural gas distribution network from Plains All American Pipeline LP, which is headquartered in Houston.
Keyera chief executive officer Dean Setoguchi played the patriotism card to help sell stock. In a press release to announce the acquisition, he said uniting the two company's assets under the Alberta company's banner 'will reinforce Canada's position as a global energy leader.'
Investor interest in a bulked-up domestic natural gas distributor allowed Keyera and an underwriting group led by RBC Capital Markets to boost the size of the sale, after initially pitching a $1.8-billion offering.
In Newfoundland, underwater drone maker Kraken Robotics Inc. also played to a MCIA theme by selling $100-million worth of stock. Desjardins Capital Markets led the offering, which came as Canada and the rest of NATO pledged to boost defence spending.
St John's-based Kraken is expanding from clients in sectors such as oil and gas, who use its sonar gear to monitor offshore platforms and underwater pipelines, into the defence industry. In marketing the stock sale, the 13-year-old company it needed to 'demonstrate a stronger balance sheet when bidding for larger governmental and commercial contracts.'
Desjardins also catered to investors who want to play defence during uncertain times by leading a stock sale for Aya Gold and Silver Inc. The Montreal-based miner is developing properties in a region of Morocco that's been producing precious metals for over a century.
In mid June, Aya announced a $100-million stock sale. Three days after marketing began, Israel began bombing Iran. Aya used the resulting spike in bullion prices to upsize its offering, closing a $144-million stock sale on June 18.
At Perpetua Resources Corp., mixing gold as a defensive market play and investor interest in the defence industry – and Mideast conflict – also translated into a larger-than-anticipated stock sale.
Perpetua, a TSX-listed company based in Boise, Idaho, is reopening a mine in the state that produces both gold and antimony, a critical mineral used in production of ammunition, night vision googles and nuclear weapons.
China, Russia and Tajikistan control 90 per cent of the global antimony supply chain. The prospect of establishing the only home-grown antimony supplier prompted the U.S. Defence Department to invest US$34.6-million in the project in February.
On June 10, just before Israel tangled with Iran, National Bank Financial and BMO Capital Markets launched a US$300-million stock sale for Perpetua. Six days later, they had closed on a US$325-million offering, boosted to meet investor demand.
For many of us, June was a month to forget, with wars raging, trade turmoil and temperatures soaring to dangerously high levels in Eastern Canada's largest cities.
For investors in TSX-listed stocks, and investment banks selling shares, June was a month for the ages. The National Bank team summed it up by saying MCIA sentiment drove the S&P/TSX benchmark to record highs 'despite sluggish domestic demand, a soft labour market, and record high uncertainty surrounding trade policy.' In June, Canada was eminently investable.
