CANADA - Public markets in Canada are experiencing a noticeable contraction, highlighted by a significant capital outflow and a reduction in the number of companies listed on the Toronto Stock Exchange (TSX). Bloomberg's recent analysis revealed that $12.5 billion has been wiped off the TSX this year, with 19 companies either being privatized or declaring bankruptcy. Among the most notable exits are Summit Industrial Income REIT and Home Capital Group Inc.
The pace at which new stocks are entering the market is also slowing down. This year, there has been only one initial public offering (IPO) on the TSX, with an additional twelve listings on its junior exchange. Combined, these new entrants have raised a modest US$114 million, which pales in comparison to previous years' activities. J.R. Laffin, co-head of Stikeman Elliott, a prominent firm on Bay Street, points out that private equity firms are showing a strong interest in acquiring small- and mid-cap companies at discounts, utilizing their available "dry powder" – industry jargon for unallocated capital.
This trend is indicative of a potential annual contraction in the TSX’s total market capitalization, which currently stands at $3.77 trillion. The S&P/TSX composite index, which is Canada’s main equity benchmark, has only seen a modest gain of 3.7% this year. This performance is starkly contrasted by the S&P 500’s robust advance of approximately 19%, underscoring the challenges faced by Canadian markets.
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