Every global investor needs to seriously consider allocating a portion of their investment dollars to an investment in Canada. There are many reasons to do so and I will go through five of them below.
Reason 1: Canada is a resource-abundant nation and those resources are spread across the country.
No other country in the world can offer the diversity and abundance of resources that Canada has. China and India have greatly increased demand for resources which has no signs of letting up. As long as resource prices remain high, there will always be profitable business ventures in Canada and those ventures will have a positive trickle-down effect to other parts of the Canadian economy.
Not only is Canada resource rich, but the abundance of resources is spread throughout the Country. Quebec and BC are abundant in gold, Saskatchewan is considered one of the top places in the world for potash, Alberta is well knows for the oil sands and Ontario and the Northern Territories have significant base metal deposits.
All these valuable resources spread equally throughout the country in tandem with some of the other reasons below ensure Canada is wealthy throughout the country. No province is drastically poorer off than the others.
Canada's fairly high unemployment rate, which sits between 8-9% has a lot more to do with structural unemployment where manufacturing jobs are permanently diminishing thanks to the US export industry slowing, but are being replaced by mining and service sector jobs. It takes time for people to update their skill set in order to be able to be a suitable candidate for the job.
Reason 2: Canada is a politically stable country.
Canada has one of the most politically stable systems in the world with the right-leaning Conservatives and left-leaning Liberals both being pro-business. As the only two parties who have a legitimate shot at running the government in Canada, an investor can expect that pro-business and investment approach to remain intact. Quebec sovereignty issues that plagued the country in the mid-90's have died down significantly. Contrary to what is widely believed, Canada has one of the lowest corporate tax rates in the world. It is in the range of 11-18% on the Federal level and 2-16% on the Provincial level, much lower than America's corporate tax rate of 15-39% on the Federal level and 0-12% on the State level.
Canada's government is friendly to acquisitions abroad by foreigners. In the past few years some of those large deals included Vale, a Brazilian Mining company purchasing Inco, a nickel and copper miner out of Ontario and Xstrata, a Swiss-based mining company acquiring Falconbridge and Noranda. Other companies have been named as possible buyout targets by the Chinese, including Opti Canada and Nexen who own Long Lake, a large oil sands project, and Compton Petroleum, who own significant oil and gas assets in Alberta. An investment in Canadian companies could result in very good returns in a relatively short time frame if you choose one that gets purchased by another company.
Canada has a policy of economic equalization which involves transfer payments made at the Provincial tax level from the "have" to the "have not" provinces. While that can lead to game theory where the have not provinces make poor spending choices in order to ensure they still receive their transfer payments, the system ensures that the country remains socially and politically stable, in contrast to the United States where significant variances in wealth state by state can be seen.
Reason 3: Canada has the best banking system in the world
According to the World Economic Forum, Canada has the world's soundest banking system.
After the world markers were rattled by the instability of American, United Kingdom and other countries' banks, a sound banking system is of great importance when considering whether to invest in a country. There is a direct link to sound banks and sound capital markets. You can read more detail on Canada's banking system here.
Reason 4: Canada is located in a geographically superior area for global trade.
Everyone is well aware that Canada's close proximity to the United States gives it a competitive advantage when exporting good to the country, but Canada is so large that it can be a legitimate trading partner to every major global player in the world. On the west coast, Canada is not too far from Japan and China, on the east coast it is not too far from Europe and over the Arctic its not too far from Russia. Canada's large land mass allows it to ship goods across large distances without border delays or taxes. Basically the emergence of the European Union came about in an attempt to be as efficient as Canada when moving goods across large distances on land insofar as it is borderless.
Reason 5: Canada has a strong currency expected to get stronger.
The four reasons above, especially the resource-abundance and banking stability, have contributed to a rising Canadian dollar that is expected to get stronger, particularly against the US Dollar. Anyone who is to invest in Canada would be doing so in Canadian Dollars. Any appreciation of the Canada Dollar against an investor's home currency will be like receiving a bonus return on their investment on top of the original investment itself because if sold and translated back to the investor's home currency, the Canadian Dollar would be able to buy back more of that currency than what the investor originally paid to receive the Canadian currency in the first place.
If you are interested in learning about how to access the Canadian equity market, click here.
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