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Toronto — Foreign investors are increasingly worried that Canada’s federal elections on Monday could impede Ottawa’s response to the COVID-19 pandemic and lead to a deadlock that further delays economic recovery from the crisis. There is.
Opinion polls show that Justin Trudeau’s centre-left Liberal Party is effectively tied to opposition conservatives prior to the September 20 vote, raising the possibility that even a stable minority government will not be formed. There is. In addition to uncertainty, there is an expected increase in mail voting that can delay the counting of votes in some major constituencies.
Financial markets generally look at Canada’s elections in terms of which major party is the most friendly to investors, but the trend lags behind the desire to quickly establish a government in the event of a crisis. May take.
The results of Canadian elections are usually available within hours of the end of the vote. Even if no party has won a majority of seats, it is usually clear who will form the government and what the general policy priorities will be.
“The consequences of government stagnation will complicate future recovery, which is why (investors) hesitate before the election,” said Edward Moya, senior market analyst at OANDA. Stated. New York.
“Currently, we are in the process of economic recovery and everything needs to be well aligned.”
Trudeau, who has been prime minister for six years, has relied on the support of the New Democrats because he failed to win a majority of the House of Commons seats in the 2019 elections. Polls show a small left-handed party ready to do better on Monday, and there is probably enough support to force the Liberal Party to lean to the left if it wants to retain power.
Spending
The Trudeau administration has spent billions of dollars to stop the outbreak from the pandemic, and the Bank of Canada has cut interest rates and bought bonds to stimulate the economy. The central bank has pledged to keep key interest rates at record lows of 0.25% until the economic downturn is absorbed, but there are signs of annoyance.
Canada’s economic growth slowed in the second quarter, and annual inflation surged to its 18-year high in August, removing some of the wind from the sails of economic debate over the reelection of liberal leaders.
After Trudeau called for elections in mid-August, the Canadian dollar fell 1.1% to about 1.2650 per US dollar, or 79.05 US dollars, and speculators turned bearish against the currency for the first time since December last year.
Market measurements of expected currency volatility over the week covering the elections rose from less than 5% in August to an annual rate of about 7.5%.
The Toronto Stock Exchange’s S & P / TSX Composite Index fell 1.7% on Tuesday, hitting its lowest closing in almost three weeks. Meanwhile, the index of implied volatility on the Toronto Stock Exchange reached its highest closing price since August. twenty three.
Equity investors have campaigned by the parties, including a pledge that Trudeau will help the most profitable banks and insurance companies raise corporate taxes to help pay recovery costs, and his pledge to immediately limit oil and gas. I’m nervous about some of my promises. Emissions.
Greg Taylor, Portfolio Manager at Purpose Investments in Toronto, said:
He is also nervous about the promise that the main opposition, the Conservative Party, will intensify external competition in the telecommunications sector, and the Liberal Party’s pledge to curb excessive profits from rental housing that could damage real estate investment trusts. It has become.
Russil Lea, portfolio manager at Nicola Wealth in Vancouver, said: “The race looks very tight and the only certainty right now is the uncertainty about how the election will go.”
Fergal Smith
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