The Canadian market for initial public offerings in the third quarter was up from a year ago, helped by the real estate sector, but uncertainty over interest rates and the mining sector make it unclear if the pace will continue for the rest of the year.
PricewaterhouseCoopers said Tuesday that seven new offerings on Canadian markets accounted for a total of $802 million raised in the third quarter, up from $271 million raised from seven IPOs in the same period a year earlier.
Five IPOs on the Toronto Stock Exchange raised $798 million for the three months ended Sept. 30, up one new issue a year ago that raised $212 million.
The largest was the launch of Choice Properties Real Estate Investment Trust (TSX:CHP.UN) from Loblaw Companies Ltd. (TSX:L) that raised $400 million.
PwC national IPO leader Dean Braunsteiner said REITs have been strong this year, but the unpredictability of interest rates _ whether they’ll increase and by how much _ may not support the trust market in the future.
“IPOs from a diverse list of sectors like energy, banking, transportation and technology suggests broad interest in the Canadian IPO market,” said Braunsteiner in a statement.
“But lacking a real ‘engine’ to drive the market, the last quarter of 2013 and the first part of 2014 will be hard to predict.”
The trust market has benefited from low interest rates that have kept their borrowing costs low and made them attractive investments for investors seeking steady cash flow.
However as interest rates rise, bonds will become more attractive to investors seeking a steady stream of payments and increase the cost of borrowing for REITs.
The PwC survey noted that weakness in the mining sector due to depressed commodity prices also has the potential to pull down the Canadian IPO market.
About $2 billion in new equity has been raised from 23 new issues so far this year, compared with $491 million from 39 IPOs in the same period of 2012, according to the survey.