Following two days of heavy losses, income trusts staged a rebound Friday as some investors went bargain-hunting in the beaten-up sector.
The TSX income trust index was up 3.8 per cent at the end of the trading day.
Federal Finance Minister Jim Flaherty announced a new distribution tax on income trusts at a news conference on Tuesday.
(Canadian Press/Fred Chartrand)
The index had lost 12 per cent of its value on Wednesday and another 4.3 per cent on Thursday after federal Finance Minister Jim Flaherty announced a new distribution tax on income trust payouts.
CI Financial Income Fund rose 90 cents to $24.28; Yellow Pages Income Fund gained 43 cents to $13.03.
Energy trusts — which were ahead by 4.0 per cent — led the income trust sector higher on Friday. Energy trusts account for about half of the trusts listed on the TSX.
Analysts said the lower unit prices on energy trusts are sparking more talk of takeovers in the future, noting that the price premium that some trusts had carried because of their trust structure has unravelled.
"To the extent that royalty trusts become discounted relative to their [non-trust] peers, then they become ripe for takeovers," Rob Moss, oil and gas analyst with Acumen Capital Partners, told CBC News.
Rising oil prices were also helping the energy trusts, in particular, as crude futures gained $1.26 to $59.14 US a barrel.
Canadian Oil Sands Trust gained $1.19 to $28.36; Penn West Energy Trust added $1.55 to $35.30; Energy Savings Trust jumped $1.32 to $13.79.
Income trust group launches protest campaign
This weekend, the group that represents the country's 250 income trusts will launch a national campaign against Ottawa's plans to tax trusts.
The Canadian Association of Income Funds will run newspaper ads urging Canadians to contact their MPs and "ask them to take immediate action to stop the destruction of their hard-earned savings."
"We strongly urge the minister of finance to listen to the outcries of Canadians before enacting this legislation," said CAIF president George Kesteven.
But the Canadian Association for the Fifty Plus (CARP), which has 400,000 members, isn't about to join CAIF's protest.
"CARP commends … Flaherty for adopting a prudent approach to his new policy regarding income trusts," the association said on its website.
CARP acknowledged that the new rules "will be a blow to many seniors" but noted that current trusts will be exempt from the new taxes until 2011.
"CARP is especially pleased that the minister has balanced his income trust initiative with permitting pension splitting as of 2007," it said.
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