Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BofA Securities foreign exchange strategist Howard Du thinks recent weakness in the loonie is overdone,
“Short-term: August USD/CAD rally has overshot vs cross-asset factors and we expect the pair to normalize lower over the next month… Specifically, we see [USDCAD] decline to 1.33 [CAD$0.752] by the end of Q3 … The month-to-date broad USD rally has been aggressive, particularly vs the high-beta currencies in G10. For USDCAD, the pace of the rally from July 31 would rank at 94th percentile since 1999. The CAD has notably weakened despite higher crude oil price in the first half of August. CA yields has increased with US yields in both nominal and real terms. So relative to interest rate differentials, current USDCAD spot appears to be too rich … s financial conditions tightened on the back of US Treasury selloff, risky asset had sold off. But compared to the decline for the S&P 500, CAD weakness also looks overshot”
CIBC energy analyst Dennis Fong discussed the most important themes for the second half of the year,
“At a high level, we prefer companies with stronger balance sheets and resilient margins which could protect free cash flow generation from oil price volatility. We believe the Canadian large-cap companies still provide value for investors given the pace of de-leveraging and capital allocation plans which will eventually shift all free cash flow towards shareholder returns. We view there to be four broad themes that should guide investor positioning through H2/23 and 2024 … OPEC+ voluntary production cut outweighs recession concerns … Cost savings through efficiency improvements will continue to be a focus … Portfolio repositioning. As concerns around an economic recession moderated, we saw an increased interest in names with perceived higher torque to the oil price … Quarter-to-date crack spreads have moved above historical five-year average”
CIBC economist Benjamin Tal published Counting heads in Canada – a conundrum which argues that undercounted population growth is contributing to the housing affordability crisis,
“Lately there has been a growing focus on the rapid increase in the number of non-permanent residents (NPRs) in general, and foreign students in particular. In the following note, we suggest that the official number of NPRs that is widely quoted and used for planning purposes undercounts the actual number of NPRs residing in Canada by close to one million. That means that any policy aimed at capping the number of NPRs is more urgent than perceived … In 2013, the official forecast and the base for planning was that the Canadian population would reach 38.7 million in 2023. No less than 1.1 million of that 1.5 million forecast miss was due to a much larger than expected increase in the number of NPRs, and most of the remaining miss was due to stronger than expected immigration. Translating that figure into housing demand, that miss is equivalent to more than 2 years of building capacity … That’s a big number. But it turns out that the real number is much bigger… But two measurement issues related to the counting of NPRs suggest that the size of the miss might be closer to 2.5 million — a full million larger than the reported miss”
“Counting heads in Canada — a conundrum” – CIBC Economics
Tense diplomatic relations may not impact trade, investment ties between India, Canada: Experts
NEW DELHI: The tense diplomatic relations between India and Canada are unlikely to impact trade and investments between the two countries as economic ties are driven by commercial considerations, according to experts. Both India and Canada trade in complementary products and do not compete on similar products.
“Hence, the trade relationship will continue to grow and not be affected by day-to-day events,” Global Trade Research Initiative (GTRI) Co-Founder Ajay Srivastava said.
Certain political developments have led to a pause in negotiations for a free trade agreement between the two countries.
On September 10, Prime Minister Narendra Modi conveyed to his Canadian counterpart Justin Trudeau India’s strong concerns about the continuing anti-India activities of extremist elements in Canada that were promoting secessionism, inciting violence against its diplomats and threatening the Indian community there.
India on Tuesday announced the expulsion of a Canadian diplomat hours after Canada asked an Indian official to leave that country, citing a “potential” Indian link to the killing of a Khalistani separatist leader in June.
Srivastava said these recent events are unlikely to affect the deep-rooted people-to-people connections, trade, and economic ties between the two nations.
Bilateral trade between India and Canada has grown significantly in recent years, reaching USD 8.16 billion in 2022-23.
India’s exports (USD 4.1 billion) to Canada include pharmaceuticals, gems and jewellery, textiles, and machinery, while Canada’s exports to India (USD 4.06 billion) include pulses, timber, pulp and paper, and mining products.
On investments, he said that Canadian pension funds will continue investing in India on grounds of India’s large market and good return on money invested.
Canadian pension funds, by the end of 2022, had invested over USD 45 billion in India, making it the fourth-largest recipient of Canadian FDI in the world.
The top sectors for Canadian pension fund investment in India include infrastructure, renewable energy, technology, and financial services.
Mumbai-based exporter and Chairman of Technocraft Industries Sharad Kumar Saraf said the present frosty relations between India and Canada are certainly a cause for concern.
“However, the bilateral trade is entirely driven by commercial considerations. Political turmoil is of a temporary nature and should not be a reason to affect trade relations,” Saraf said.
He added that even with China, India has acrimonious relations but bilateral trade continues to remain healthy.
“In fact, bilateral trade is an effective tool to improve political relations. India must make special efforts to increase our bilateral trade with Canada,” Saraf said.
India and Canada have a strong education partnership. There are over 200 educational partnerships between Indian and Canadian institutions.
In addition, over 3,19,000 Indian students are enrolled in Canadian institutions, making them the largest international student cohort in Canada, according to GTRI.
According to the Canadian Bureau for International Education (CBIE), Indian students contributed USD 4.9 billion to the Canadian economy in 2021.
Indian students are the largest international student group in Canada, accounting for 20 per cent of all international students in 2021.
Benefits of educational partnerships are mutual and hence the current situation may have no impact on the relationship, Srivastava said.
Apple supplier Foxconn aims to double India jobs and investment
Apple supplier Foxconn aims to double its workforce and investment in India by next year, a company executive said on Sunday.
Taiwan-based Foxconn, the world’s largest contract manufacturer of electronics, has rapidly expanded its presence in India by investing in manufacturing facilities in the south of the country as the company seeks to move away from China.
V Lee, Foxconn’s representative in India, in a LinkedIn post to mark Indian Prime Minister Narendra Modi’s 73rd birthday, said the company was “aiming for another doubling of employment, FDI (foreign direct investment), and business size in India” by this time next year.
He did not give more details.
Foxconn already has an iPhone factory employing 40,000 people in the state of Tamil Nadu.
In August, the state of Karnataka said the firm will invest US$600 million for two projects to make casing components for iPhones and chip-making equipment.
The company’s Chairman Liu Young-way said in an earnings briefing last month that he sees a lot of potential in India, adding: “several billion dollars in investment is only a beginning”.
Taiwan election: Foxconn’s Terry Gou taps star-powered running mate
Last month, Foxconn’s billionaire founder Terry Gou said he would run for the Taiwanese presidency in next year’s election, as an independent candidate.
He said the ruling and independence-leaning Democratic Progressive Party (DPP) was unable to offer a bright future for the island and left Foxconn’s board following his decision to run.
The firm operates the world’s largest iPhone plant, in the city of Zhengzhou in Henan province.
Foxconn to double workforce, investment in India by ‘this time next year’
Canada's economy was flat in July, new GDP numbers from Statistics Canada show – CBC News
David Hockney: Ceramic cat gifted by hitchhiking art student to be sold – BBC
India-Canada news: Blinken meets Indian foreign minister – CTV News
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