Everything You Need to Know on Friday: Capital Gains Tax Changes Will Impact Financial Corporations the Most

Good morning mooers! Here are things you need to know about today's market:

● S&P/TSX 60 Index Standard Futures are trading at 1,319.20, up 0.23%.

● U.S. residential energy consumption rose 12% YoY in January, EIA reports

● Capital gains tax changes will impact financial corporations the most: economists

● Honda to build $15 billion EV assembly plant and battery complex in Ontario

● Stocks to watch: TWC Enterprises

Today, the Canadian dollar is trading at 73.13 cents US, a slight increase from Thursday.

The S&P/TSX 60 Index Standard Futures (SXF) are currently trading at 1,319.20, which is up 0.23% from the previous close.

U.S. residential sector energy consumption rose 12% year over year in January, the U.S. Energy Information Administration reported on Thursday.

According to preliminary estimates, U.S. residential sector energy consumption increased to 2.4 quadrillion British thermal units in January.

Electric sales and associated electrical system energy losses made up 52% of total energy consumption in the residential sector, the EIA noted.

Natural gas accounted for 40% of residential energy sector consumption, petroleum made up 6% and renewable energy accounted for 2%.

Economists say the impact of Ottawa’s move to raise the inclusion rate on capital gains taxes will impact financial corporations most of all.

Florence Jean-Jacobs, a principal economist at Desjardins, and Randall Bartlett, a senior director of Canadian economics at Desjardins, said in a report Thursday that the impact of the new measures will be felt differently across industries. Last week Canada’s federal government tabled its 2024 budget, which included intentions to raise the inclusion rate on capital gains taxes from one-half to two-thirds for all gains realized by corporations and trusts. The new rate would only impact individuals with gains above $250,000.

“In the absence of public data on capital gains by sector, the greater the assets (especially financial assets), the greater the risk that some of these industries could be affected by the changed inclusion rate for capital gains,” the report said.

“This is especially the case for financial corporations, which derive a not insignificant share of their profit from capital gains.”

The economists highlighted that generally, non-financial private corporations have a “fairly diverse asset base” with around 55 per cent coming from financial assets, while financial corporation assets are 99 per cent liquid.

“We can therefore assume that the financial sector is likely to be the most impacted by the new measure. This would include the major asset holders in that industry: banks and quasi-banks (37 per cent of assets), mutual funds (16 per cent), and captive financial institutions and money lenders (15 per cent),” the report said.

The report said around 300,000 corporations in Canada declare capital gains, or around 12.6 per cent of businesses. Additionally, the tax changes are believed to generate around $19.4 billion in revenue over the next five years.

After months of rumours, Honda Motor Co. Ltd. on Thursday confirmed it is building an electric-vehicle assembly plant, a battery production plant and a cathode active material plant in Alliston, Ont., for an estimated $15 billion, making it the largest investment yet in the country's EV supply chain.

The EV assembly plant is expected to begin production in 2028 with an annual capacity of 240,000 vehicles, and the battery plant will have an annual capacity of 36 gigawatt hours (GWh) per year. Together, they will add approximately 1,000 workers to Honda’s workforce.

“The world is changing rapidly,” Toshihiro Mibe, chief executive of Honda, said during the announcement, alongside Prime Minister Justin Trudeau and Ontario Premier Doug Ford, as well as Deputy Prime Minister Chyrstia Freeland, Industry Minister François-Philippe Champagne and Ontario Trade Minister Vic Fedeli. “And we must work towards achieving carbon neutrality.”

He described the Honda plant as “a vertically integrated and comprehensive EV battery chain in Canada.”

Mibe said the company will also build midstream battery facilities in Ontario, including a cathode active material plant through a joint venture with Korea’s LG Energy Solution Ltd., and a separator plant with Japan's Asahi Kasei Corp.

The golf club operator reported a 147% increase in revenue to $65.3 million due to the revenue from 21 Highland Gate home sales, which didn't book any revenue a year ago.

The company declared a dividend of $0.075 per share, payable June 17 to shareholders of record as at May 31.

TWC's shares were little changed yesterday and closed at $17.50.

Source: BNN Bloomberg, Financial Post, MT Newswire