Investment flooding out of Canada at fastest pace in developed world

B00Mer

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Investment flooding out of Canada at fastest pace in developed world



Money is flooding out of Canada at the fastest pace in the developed world as the nation’s decade-long oil boom comes to an end and little else looks ready to take the industry’s place as an economic driver.

Canada’s basic balance — a measure of national accounts that spans everything from trade to financial-market flows — swung from a surplus of 4.2 per cent of gross domestic product to a deficit of 7.9 per cent in the 12 months ending in June, according to analysis from Kamal Sharma, a foreign-exchange strategist at Bank of America Merrill Lynch. That’s the fastest one-year deterioration among 10 major developed nations.

More recent data on where companies and mutual-fund investors are putting their money show the trend extended into the second half of the year, suggesting demand for the Canadian dollar and the country’s assets is still ebbing. The currency is already down 11 per cent this year, after touching an 11-year low against the U.S. dollar in September.

Money is flooding out of Canada at the fastest pace in the developed world as the nation’s decade-long oil boom comes to an end and little else looks ready to take the industry’s place as an economic driver.

Canada’s basic balance — a measure of national accounts that spans everything from trade to financial-market flows — swung from a surplus of 4.2 per cent of gross domestic product to a deficit of 7.9 per cent in the 12 months ending in June, according to analysis from Kamal Sharma, a foreign-exchange strategist at Bank of America Merrill Lynch. That’s the fastest one-year deterioration among 10 major developed nations.

More recent data on where companies and mutual-fund investors are putting their money show the trend extended into the second half of the year, suggesting demand for the Canadian dollar and the country’s assets is still ebbing. The currency is already down 11 per cent this year, after touching an 11-year low against the U.S. dollar in September.

“This is Canadian investors that are pushing money abroad,” said Alvise Marino, a foreign-exchange strategist at Credit Suisse Group AG in New York. “The policy in Canada the last 10 years has greatly favoured investments in energy. Now the drop in oil prices made all that investment unprofitable.”

Crude oil, among the nation’s biggest exports, has collapsed to about half its 2014 peak. The slump has derailed projects this year in Canada’s oilsands — one of the world’s most expensive crude-producing regions. Royal Dutch Shell Plc’s decision to put its Carmon Creek drilling project on ice last week lengthened that list to 18, according to ARC Financial Corp.

Foreign Lure

Canadian companies, meanwhile, have been looking abroad for acquisitions. Royal Bank of Canada is expected to close its $5.4 billion US purchase of Los Angeles-based City National Corp. Monday, its biggest-ever takeover. It’s part of a net outflow of $73 billion Cdn this year for mergers and acquisitions, both completed and announced, according to Credit Suisse data.

Nine of the 10 best-performing companies on the country’s benchmark stock index in the past two years have favoured buying growth abroad rather than expanding at home.

Individuals are following suit. While international appetite for Canadian financial securities has held steady this year, domestic mutual-fund investors have pulled money from Canada-focused funds and plowed it into global choices for six straight months, the longest streak in two years, according to Investment Funds Institute of Canada data compiled by Bank of Montreal.

Lonnie Implication

What it all means is the Canadian dollar has to get cheaper to make Canadian businesses outside of the oil industry competitive enough with foreign peers to make them worth investing in, according to Benjamin Reitzes, an economist at Bank of Montreal.

Money is flooding out of Canada at the fastest pace in the developed world as the nation’s decade-long oil boom comes to an end and little else looks ready to take the industry’s place as an economic driver.

Canada’s basic balance — a measure of national accounts that spans everything from trade to financial-market flows — swung from a surplus of 4.2 per cent of gross domestic product to a deficit of 7.9 per cent in the 12 months ending in June, according to analysis from Kamal Sharma, a foreign-exchange strategist at Bank of America Merrill Lynch. That’s the fastest one-year deterioration among 10 major developed nations.

More recent data on where companies and mutual-fund investors are putting their money show the trend extended into the second half of the year, suggesting demand for the Canadian dollar and the country’s assets is still ebbing. The currency is already down 11 per cent this year, after touching an 11-year low against the U.S. dollar in September.


“This is Canadian investors that are pushing money abroad,” said Alvise Marino, a foreign-exchange strategist at Credit Suisse Group AG in New York. “The policy in Canada the last 10 years has greatly favoured investments in energy. Now the drop in oil prices made all that investment unprofitable.”

Crude oil, among the nation’s biggest exports, has collapsed to about half its 2014 peak. The slump has derailed projects this year in Canada’s oilsands — one of the world’s most expensive crude-producing regions. Royal Dutch Shell Plc’s decision to put its Carmon Creek drilling project on ice last week lengthened that list to 18, according to ARC Financial Corp.

Foreign Lure

Canadian companies, meanwhile, have been looking abroad for acquisitions. Royal Bank of Canada is expected to close its $5.4 billion US purchase of Los Angeles-based City National Corp. Monday, its biggest-ever takeover. It’s part of a net outflow of $73 billion Cdn this year for mergers and acquisitions, both completed and announced, according to Credit Suisse data.

Nine of the 10 best-performing companies on the country’s benchmark stock index in the past two years have favoured buying growth abroad rather than expanding at home.

Individuals are following suit. While international appetite for Canadian financial securities has held steady this year, domestic mutual-fund investors have pulled money from Canada-focused funds and plowed it into global choices for six straight months, the longest streak in two years, according to Investment Funds Institute of Canada data compiled by Bank of Montreal.

Lonnie Implication

What it all means is the Canadian dollar has to get cheaper to make Canadian businesses outside of the oil industry competitive enough with foreign peers to make them worth investing in, according to Benjamin Reitzes, an economist at Bank of Montreal.

The median forecast among strategists surveyed by Bloomberg has the loonie weakening to $1.34 per U.S. dollar by the first three months of next year from about $1.31 now. The country’s economy is expected to lag behind the U.S., its largest trading partner, for the next two years, according to the median estimate of a separate Bloomberg poll.

While manufacturing and service exports have improved thanks to the Canadian dollar’s depreciation, they remain below levels from before the financial crisis, according to Royal Bank of Canada foreign-exchange strategist Elsa Lignos. That suggests the country still hasn’t won back the economic capacity it lost, she wrote in an Oct. 29 note.

The country is expected to post its 12th straight merchandise trade deficit this week, according to every economist in a Bloomberg survey.

Given that the loonie was at parity with the U.S. dollar as recently as 2013, overseas companies discussing putting money into Canada may be waiting to see that the currency stays weak before investing again, according to BMO’s Reitzes.

“Maybe a year from now you don’t have that conversation because it’s been there for a year and you have confidence it’s going to stay there, so you buy that plant or make a new plant in Canada,” he said. “It takes time for that currency impact to be felt.”

Source:: Investment flooding out of Canada at fastest pace in developed world | Calgary Herald
 

Corduroy

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Feb 9, 2011
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That's how capitalism works. Invest and plunder. Maybe Canada needs to hire privateers to loot some Spanish galleons so we can shove more precious medals into our vaults.
 

mentalfloss

Prickly Curmudgeon Smiter
Jun 28, 2010
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Can we close this thread please?

Mine was earlier and with a much wittier opener.
 

Corduroy

Senate Member
Feb 9, 2011
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Can we close this thread please?

Mine was earlier and with a much wittier opener.

It's says a lot about the state of debate on this forum that you both used the same article to make opposite points. Of course, to be fair to B00Mer, he probably didn't read/understand the article.
 

darkbeaver

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How much of the migrating investment is going to the Brics nations?

Global Shift in the Balance of Power Is Moving from West to ...


www.globalresearch.ca/global-shift-in-the...is-moving...west.../5437388
Mar 18, 2015 - Global Shift in the Balance of Power Is Moving from West to East ... to become a founding member of the Asian Infrastructure Investment Bank (AIIB). ... Enter the China led BRICS alliance and its New Development Bank and now .... For years the CIA and US Empire have been hard at work in nations from ...
 

petros

The Central Scrutinizer
Nov 21, 2008
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build factories in Gull Lake amongst the gas, oil, electric whirly gigs and beef.

maybe Putz could get a job cleaning toilets for Ford?
 

captain morgan

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Mar 28, 2009
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It'd make a lot more sense to build the mfg capacity close to the actual power supply and Lord knows that there is a ton of NG all throughout the WCSB.

Hell, You could make a case for the same plants to be built close to Regina that is a stones throw to the US border with good highways and rail access... That would be a no-brainer