Editorial Investor confidence must be maintained

Canadians, notorious for their ultra-conservative investment addic tion, appear to be shedding their Canada Savings Bond fixation and moving into the big, bold world of share ownership, i.e. the stock market.

A recent in-depth survey of the ownership of shares in this country carried out at the behest of the Toronto Stock Exchange shows that almost 3.2 million Canadians or 18% of the adult population now either own shares directly in a publicly-traded company or through a stock mutual fund. Indeed there are close to one million more share owners now than in 1983 when its last survey was conducted, representing a 40% increase in just three years. This rather dramatic turnaround now brings us up to almost the same level as exists in the United States, where risk-taking has long been a common attribute and one which has built for that nation one of the highest standards of living in all the world.

Virtually all segments of the country reflect this broadening and gr owing interest in owning shares, the survey shows. Ontario and Quebec, the two richest provinces, still dominate the scene percentagewise, with a very substantial increase in the involvement of younger Canadians, particularly women. University graduates represent more than twice the national average, and come from households with incomes in excess of $50,000. But for most, stocks still represent only a very modest percentage of their total assets, with most portfolios valued at under $10,000. Reasons for this change of heart are interesting. While the sustained recovery from the 1981-3 eco nomic slump coupled with lower interest rates are no doubt factors, the 1985 federal budget, which allows individuals to exempt from tax up to $500,000 of capital gains over a 5-year period, is proving highly significant and constructive. Yet surprisingly, the survey indicated that more than half of Canadians are either unaware of or unfamiliar with this capital gains tax exemption. (This paper has long maintained capital gains taxation regressive and costly to collect.)

Growing investor confidence, too, is a big plus in this new and blossoming trend to share ownership as a savings vehicle and must be maintained at all cost. Headline stories of huge stock market profits being reaped via illegal insider trading don’t help. Nor do such market shenanigans as witnessed in Vancouver recently when a penny stock zoomed overnight to over $22 a share on some pie-in-the-sky proposal.

Given the right environment, there is every likelihood that this broadening of share ownership will continue. In fact the majority of share owners reported plans to increase or at least maintain their portfolios over the next 12 months, while 3% of the non-share owners surveyed claim that they will definitely purchase stocks over the next few years and an additional 10% said they “might” purchase shares. Based on these intentions, then, we could see the level of share ownership in this country rising through 20% by 1989.

“A healthy and expanding capital market is the key to economic growt h and job creation. The Toronto Stock Exchange believes improved access to equity capital will allow corporations to maintain financial health and, through this, provide more jobs for Canadians,” says Terry Popowich, the TSE’s vice-president, economic and public affairs.

That exchange is to be commended for its far-reaching and invigorati ng report. Now, if only Finance Minister Michael Wilson will abstain from any measures to rock this clear sailing economic boat in his upcoming budget, we could well be coming into better times.