Finance Minister Jim Flaherty's surprise move to tax income trusts created havoc on Bay Street and Main Street and caused a stir in the Commons yesterday, but is unlikely to inflict any major damage on the economy.
Income trust investors suffered more than $20 billion in paper losses on their portfolios as some of Canada's best-known companies -- from telecom giants BCE and Telus to Yellow Pages, CI Financial, Canadian Oil Sands and Aeroplan -- were battered by the rush selling following Flaherty's surprise announcement on Tuesday that trusts will be taxed more like corporations.
The Toronto stock market plunged 294.2 points -- 2.4 per cent -- as investors dumped income trusts and blue-chip companies planning to convert. It represented the market's biggest one-day drop in 2 1/2 years.
"The quality of the companies isn't the issue. It's the valuation that gets put on them," said Ian Filderman at Scotiabank wealth management.
"There are some very good companies that happen to be in trust form right now," Filderman said. "And I'm actually quite impressed at how well the market seems to be taking this -- I don't sense any panic, what I really sense is a very orderly review of 'What does this all mean and how does this impact on the strategy in my holdings?' " Article continues....
