Income trust market still hot

(August 20, 2003) Canada’s income trust market grew by $3.5 billion in the second quarter of 2003, according to figures released today by the IDA. The income trust universe is now valued at $50.8 billion, up 15% since the end of 2002.

Thirty new trusts were created in Q2, with an average value of $101 million. Nearly 40% of those trusts came from the resource sector.

The IDA says the growing investor appetite for higher returns combined with low interest rates pushed income trust financing to its fourth highest quarterly value.

Overall, Q2 saw a more favourable financing environment for Canadian corporations, which raised $8.9 billion in the three months ending June 30, a 27% increase from the previous quarter.

“Though firms saw a resurgence of underwriting in the quarter, financing still remained 25% below the stellar second quarter of last year,” the report says.

Common equity financing surged to $4.4 billion, a 123% increase from Q1. The resource sector also attracted the largest share of common equity financings, fuelled by higher world commodity prices.

Most encouraging was the jump in initial public offering (IPO) activity, the IDA says, with 12 IPOs offering a total of $318 million. The IPO market was virtually non-existent in the first quarter.

North American stock markets posted double-digit gains in Q2, with the S&P/TSX Composite Index rising 10% and the NASDAQ climbing 21%. Contributing factors included the quick resolution to the war in Iraq, the U.S. government’s economic stimulus package and increased corporate profitability in Q1, the IDA says.

Trading volume on the Toronto Stock Exchange rose to 12.9 billion shares in Q2, the second most active quarter in the past four years.

Filed by Doug Watt, Advisor.ca, dwatt@advisor.ca