Non-confidence vote a non-event: Industry

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There has been a muted response from the Canadian financial services industry to the fall of Harper government as it treats the result of non-confidence vote as a bit of a non-event.

The market hasn’t reacted to the parliamentary drama leading to the fall of the government at all, says Darcy Briggs, co-lead manager, Bissett Canadian Short Term Bond Fund. “The TSE keeps powering forward; bond yields are off a little bit, more a function of what’s happening globally, and dollars soften a little bit,” he said. “There is a wall of liquidity powering risk assets right now and that allows it to trump some of these other concerns for the time being.”

Going forward, Briggs doesn’t expect a large market event out of this. “A lot of what we’re seeing in the Canadian asset and financial market is being driven by events outside Canada,” he says.

Briggs points to a global pattern of subdued reaction to government changes. Even in countries that have become a bigger concern to global asset markets. “Even the fall of [Irish and Portuguese] governments have amounted to a very muted response in the asset markets.”

He admits the fall of government generally adds a degree of uncertainty but given the response in asset markets it is very fleeting. “Given it is a developed market that’s lost a non-confidence vote, it’s a small event.”

Briggs doesn’t see it playing a huge factor in the shape of things to come. “Part of that has to do with Canada being viewed as a commodity source and commodities are currently in favour in asset market and that’s attracting a lot of capital into the country and into asset markets regardless of who’s in power.”

The result of the vote of non-confidence was a foregone conclusion says John Kurgan, senior market strategist at Lind-Waldock Canada. “There weren’t really any surprises here,” he said confessing it was unprecedented in being the first one [where] the vote of non-confidence [resulted from] contempt of Parliament. “This is historic, this has never happened before.”

Stephen Harper’s minority Conservative government was defeated in 156 to 145 non-confidence vote Friday afternoon. Kurgan says if the three opposition parties came together and formed a coalition type government themselves, it could send things into a tailspin. “If that sort of thing came to pass, that could put some pressure on the Canadian dollar and maybe the TSX.”