Investors are turning up their noses at the perceived risks that come with small cap companies, a trend that works against the Street's independent investment dealers.
Overall trading in Canadian stocks held steady in the first quarter of 2008, according to data published Friday by the Investment Industry Association of Canada. But the industry group found “uncertainty in the market caused investors to turn away from small cap stocks to more established companies.”
That works in favour of domestic bank-owned dealers, which tend to focus their sales, trading and research efforts on blue chip companies. It works against brokerage house such as GMP Securities, Canaccord Capital, Blackmont Capital and the other independents, which deal in smaller growth plays.
TSX trading was up 7.6 per cent compared to the same quarter a year ago, while trading in TSX Venture small cap stock was down 15 per cent over the same time frame.
The IIAC survey found equity financing activity activity was dismal in the first quarter, somethign investment bankers are all too aware of. Two large underwritings - from CIBC and Silver Wheaton - accounted for the bulk of the $10.8 billion in activity.
Equity underwriting was down 23-per-cent from the final quarter of 2007 and 35-per-cent year-over-year, with activity from issuers and investors curtailed by the aftershocks of the credit crunch.
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