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Article courtesy of Credit Suisse
A majority decision
- Conservative control: Somewhat surprisingly, the Conservatives won a majority Government by taking 167 seats in the 308-seat House of Commons. From a capital markets perspective, we view a Conservative victory as positive overall, but mixed for certain industries. On an early view, the Liberals suffered a major decline with only 34 seats versus 77 at the time of the election call. That decline was substantially offset by the rise in NDP seats as they took 102 versus 36 at the time of the election call. Rounding out the remaining seats were 4 for the Bloc Québécois and 1 for the Green Party. Given the Conservative Party's approach to leading the previous minority Government, we expect to very clear and decisive policy agenda consistent with the election platform during the current mandate.
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Gaining popularity: We view the Conservative Party's majority government positive for capital markets, however, the rise of the NDP may highlight a potentially more divisive House of Commons. We highlight the popular vote won by each party with last election's percentages appearing in parentheses: Conservatives 39.6% (37.8%); Liberals 18.9% (26.4%); NDP 30.6% (18.2%); Bloc Québécois 6.1% (9.9%); and, Green Party 3.9% (6.8%).
- Selected sector issues: In terms of broad policies, we note the following after the Conservative victory (for greater details, please refer to our 25 April 2011 report "Approaching election day"): (a) corporate tax rate plans proposed by the Conservatives may be viewed positively for corporate valuation; (b) capital spend activities across most sectors may continue with an extension of accelerated capital cost allowances; (c) the Conservative's environmental policy was arguably less adverse for companies than other parties and, therefore, a relative positive for oil sands developments, power, mining; energy and industrials; (d) an issue to watch will be potential pension reforms with positive consequences for the financial sector; (e) potential changes in ownership restrictions for some protected industries (telecom and broadcasting), but positive for consumers; and, (f) Public Private Partnerships (industrials and infrastructure).
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Stocks to watch: With the Conservative majority, we briefly highlight a selection of stocks, including: (a) we believe the Conservatives’ environmental policies are the most investor friendly; whereas, the other parties are more negative for energy and mining, mixed for industrials (SNC) and infrastructure (BRCun); (b) potential changes to ownership restrictions may be negative for the telecom sector (BCE, RCIb, T); (c) progress towards a Canada-India Free Trade Agreement may benefit a collection of companies (BWR, BBDb, BAM, BIP); and, (d) a Conservative majority should be a relative positive for pharmacy payments which may provide a relief rally for the major drug retailers (SC and PJCa). |
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