More than half of Canadian CFA Institute members believe the measures included in the 2009 federal budget fall short of what’s necessary to improve the functioning of capital markets, a recent poll of members has revealed.
Of 583 CFA Institute members surveyed by the CFA Canadian Advocacy Council and the CFA Institute Centre, 56% indicated that the budget measures will not improve the functioning of capital markets.
But members applauded some of the specific budget measures. Two-thirds of respondents agreed with the government’s decision to purchase $75 billion of insured mortgage pools prior to the budget, while 54% of respondents welcomed the additional $50-billion commitment to the Insured Mortgage Purchase Program.
Nearly 60% agree that the Canada Deposit Insurance Corporation should be allowed to hold or own shares in its member institutions.
In addition, 55% of respondents support the new authority that allows the Minister of Finance to inject capital into federally regulated institutions and 54% agree with the creation of a new $12-billion Canadian Secured Credit Facility to purchase asset-backed securities.
“Our members, who are serious investment professionals, remain concerned as they continue to monitor the current Canadian financial situation and the proposed government measures aimed at improving the state of capital markets contained in the 2009 Budget,” said Jim Allen, director of the CFA Institute Centre’s Capital Markets Policy Group. “While our members are split on the effectiveness of the proposed changes, it is clear, however, that they believe that the values of sound disclosure, transparency and self regulation should play a significant role in future Government capital market initiatives.”
In terms of additional measures the government could take to improve capital markets, 70% said the capital gains exemption would help attract and promote investment and 60% said hedge fund regulation would improve investor confidence and transparency. Furthermore, 59% agreed that a single national regulator would help and 54% said that accelerated corporate income tax cuts would provide a climate conducive to capital market growth.
Other members disagreed: 20% said hedge fund regulation would not improve capital markets, 21% said a single securities regulator would not help, and 22% said accelerated corporate income tax cuts would not help.
With respect to the effectiveness of government action prior to the budget, CFA Institute members were divided. Of respondents, 43% said the government should have done more to support Canada through the financial crisis, while 44% felt their actions were sufficient. Another 13% of members said government actions have been excessive.
A higher proportion of members in Quebec and Ontario felt the government should have done more to address the financial crisis, at 55% and 45% respectively. This contrasted with 32% in Alberta and 33% in British Columbia.
Alberta members were also noticeably more confident about the budget measures, with 56% agreeing that the actions will improve capital market functioning, compared to just 37% of Quebec respondents.
On the topic of asset-backed commercial paper, most CFA Institute members consider the issue unresolved. Eight in 10 respondents said they think the participants in the ABCP market will draw down on additional collateral provided by the government.
“Canadian members appear to be skeptical about the asset-backed commercial paper market,” said Janine Guenther, president council representative for the Canadian CFA Institute member societies.
Looking to the future, more than half of CFA Institute members said they believe that deflation is a possibility, while 31% disagreed. Furthermore, 52% of respondents said they expect the Bank of Canada’s overnight rate to fall between 0.5% and 0.9%, while 19% expect it to fall between 0% and 0.4%.
The House of Commons passed the 2009 federal budget on Tuesday evening, by a vote of 211 to 91.
Budget measures won’t improve capital markets: CFA survey
Capital gains exemption would help attract and promote investment, members say
- By: Megan Harman
- February 4, 2009 February 4, 2009
- 12:51