New offerings in Canada have soared to a thirty-month high of $4.7 billion in December. Royal Bank of Canada plans to sell $1.8 billionin new shares by Christmas. Stock buybacks have plummeted to $16 million daily in October and November. We remain cautiously bearish (50% Short) on the EWC (iShares MSCI Canada) ETF.

The Canadian float contracted $132 million last week, but float expansion should resume in the next two weeks because several large new offerings are scheduled. Royal Bank of Canada will issue $1.8 billion, Great West will sell $801 million, and Fortis will sell $276 million. With this flood of fresh paper and the $1.5 billion that has already priced, new offerings should reach a 30-month high of $4.7 billion in December.

On the buy side, three small cash takeovers were announced last week: JLL Partners is buying Patheon for $299 million, Pallinghurst Resources is buying Platmin for $125 million, and Research in Motion is buying Chalk Media for $18 million. The $35 billion takeover of BCE was definitively cancelled last week. The telecommunications group offered to buy back 5% of its outstanding capital (market value: $672 million).

We now have almost complete data on stock buybacks in November. Canadian companies repurchased only $352 million ($17 million daily). Buybacks plummeted in the past three months as credit market difficulties forced companies to keep high cash balances.

Since Canadian companies are issuing record amounts of paper and buying very little, we remain cautiously bearish (50% short) on EWC (iShares MSCI Canada).