Surprise Liberal Majority Victory Sends Canadian Stocks Higher

  • Trudeau wins as incumbent Prime Minister Harper's rule ends
  • SNC-Lavalin, WSP rally on potential infrastructure spending

Canadian stocks rose after voters gave Justin Trudeau’s Liberal Party a surprise majority mandate following a tight three-way race. Construction companies, oil and gold producers rallied.

Trudeau, the first son of a prime minister to be elected into the same office, defeated incumbent Stephen Harper’s Conservative Party with a decisive 184 of 338 seats in the House of Commons, ending almost a decade of Tory rule, according to preliminary results from Elections Canada. Most polls had expected the Liberals would win a minority government.

The Standard & Poor’s/TSX Composite Index rose 115.38 points, or 0.8 percent, to 13,873.76 at 10:12 a.m. in Toronto. The S&P/TSX has risen 4.2 percent in October as it tries to recover from the worst quarter since 2011.

“The election is one factor within many things going on,” said Patrick Blais, a fund manager at Manulife Asset Management Ltd. in Toronto. His firm manages about C$280 billion. “The election in itself is a positive as the market doesn’t appreciate uncertainty and now we have certainty with a majority government.”

Trudeau’s surprise victory removes a layer of worry for investors in a year when Canadian equities and the dollar have struggled amid a plunge in commodity prices, expectations of the removal of U.S. stimulus and tepid global demand. The benchmark stock index has lagged global peers among developed markets this year with a 5.2 percent decline.

“Given the downturn in oil prices, the new government will be careful not to disrupt or further hinder the industry,” Blais said. “It’s not the right time to enact stringent laws.”

Energy producers gained 1.4 percent as 58 of 59 members of the S&P/TSX Energy Index advanced. Suncor Energy Inc. climbed 1.5 percent. Crude for November delivery, which expires Tuesday, added 1.1 percent to $46.39 a barrel in New York.

Canopy Growth Corp. jumped as much as 21 percent to lead marijuana stocks higher. Trudeau had also pledged to legalize the substance among his policy promises during the campaign.

Engineering companies SNC-Lavalin Group Inc. and Aecon Group Inc. rallied at least 3.3 percent in the wake of the vote as Trudeau successfully campaigned on a platform of increased infrastructure spending, said Andrew Pyle, fund manager at ScotiaMcLeod Inc. in Peterborough, Ontario. WSP Global Inc. climbed 2.8 percent.

“A pro-growth government is good for the markets,” Pyle said in a phone interview. His team manages about C$300 million.

If history is any guide, equities will trend higher under Trudeau’s incoming Liberal government.

Stretching back to 1922 and the time of William Lyon Mackenzie King, Liberal prime ministers have posted stock returns three times higher than with Conservative leaders, according to monthly data to August 2015 compiled by Bloomberg from TMX Group Ltd., the operator of the Toronto Stock Exchange.

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