Canada: Latest Exports Data Shows Improvement

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As a resource-rich country, the Canada is heavily dependent exports.Canada exports majority of its natural resources and finished products to USA, its major trading partner.In order to analyze the latest export figures, I reviewed the “Export Instant Insight” report published by Export Development Canada (EDC).

The following are some of the key points in the April,2009 report:

  • Canada’s merchandise trade balance stood at 5.2% in February of this year after falling for 6 consecutive months
  • Machinery and light equipment category was the top performing sector
  • The auto sector came in second with a growth of 20%  after production resumed in many plants
  • Too early to conclude that Canadian exports have seen the bottom in this recession
  • The Forestry products sector showed a growth of just 4.4% over the previous month indicating that the US housing market is still in doldrums
  • Despite this growth, exports volume is still 20% lower than last year levels

Chart #1: Exports (click to expand)

ca-exports.JPG

Chart #2: Export Growth Major Sector Comparison (click to expand)

ca-ex-sectors.JPG

Source: EDC

A simple and easy way to invest in Canada is via an ETF such as the ishares MSCI Canada Index Fund (EWC). As of the end of April the fund is up 9.66%.With $1.2B assets, the ETF offers an yield of 1.84%.Not surprisingly energy and materials comprise the most in the portfolio. Financials are next with about 30%.

Do The Rich Really Get Richer Overtime?

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We all have heard that the rich get richer in the US and other parts of the world. But is it really true?. How high has the income inequality between the rich and poor grown in the US?.

According to a research paper titled “Striking it Richer: The Evolution of Top Incomes in the United States” by Emmanuel Saez from the Department of Economics, University of California, Berkeley the income of the top earners has increased dramatically since the 1980s as the chart (click to expand) shows below:

rich-richer.JPG

Source:  “Striking it Richer: The Evolution of Top Incomes in the United States” by Emmanuel Saez

To read more on this fascinating paper, click here (pdf)

Knowledge is Power: Red Budget Edition

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 1.Banks are indispensable for a working economy; badly-run banks ignoring sound banking principles are not. What is needed in a depression is not more central bank money for distressed banks but government deficit money to sustain full employment with living wages. – Henry C K Liu The burden of elitism

2.HONG KONG – Although Mao Zedong died 33 years ago, the founding father of communist China seems to still be alive in the hearts of many Chinese.Tough times breed nostalgia for Mao

3.THE federal Budget will be in deficit for up to six years, according to reports. Budget in the red ‘for six years’

4. Over the past month, I have heard quite a few people declare this to be the start of a new bull market. The kindest thing I can say in response to that is the jury is still out, but the weight of the evidence is inconclusive. Market Rally: 1974 or 1982?

5.South Korea has enjoyed miraculous economic growth for the past four decades, setting it apart from many of its Asian peers. But as an engine of export and an overleveraged economy, it is now highly exposed to the global financial crisis. Eastern exposure

6. Bob Barbera, protege of Minsky and an intellectual heir to Schumpeter, forecasts stability but not growth There’s creative destruction, and then there’s this

7.Yes, this time the banks are the gangsters. They’re robbing Main Street’s treasury.Cheering  the crisis antihero

8.Report says profits up 88% to $3.2 billion, mostly driven by high-priced coal.B.C. mining industry posts record results in 2008

9. In an investing environment where a huge paradigm shift has occurred, investors run the risk of losing even more from their investments if they fail to assess the new risks that have emerged. In that environment, doing nothing means one is actually already doing something. Fixing a broken portfolio

10.France pressed its European Union partners on Tuesday to impose strict rules on hedge funds, in spite of Swedish warnings that even the tightest regulation would be no guarantee against a repeat of the current financial turmoil.France pushes for stricter hedge fund rules

Knowledge is Power: Thatcher – Founder of Modern Britain Edition

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1.Charles Dumas says things in the United States are moving roughly in the right direction; pity about China. Economist disappointed to find he’s not that gloomy

2.The Soviets dubbed her the “Iron Lady,” US President Ronald Reagan called her “England’s best man” — 30 years ago Margaret Thatcher was elected prime minister of Britain. It was the start of a radical free-market revolution which hasn’t yet been turned back. How Maggie Came to Power

3.Across OECD countries, close to 40% of high-school students who come top in science subjects have no interest in pursuing a science-related career, while almost 45% do not want to continue studying science, according to a new OECD report. Schools must do more to motivate tomorrow’s scientists, OECD study shows

4.Mulls ‘Canadian option’ as a way to tweak rather than radically overhaul the troubled U.S. system. Obama eyes Canada as bank model

5. The Barack Obama administration is trumpeting the recovery of the US economy. Yet, thanks to Federal Reserve chairman Ben Bernanke and the manner in which he has expanded his mandate far beyond what is permitted central banks, what we see is merely the illusion of a recovery, to be shattered when the bills fall due. The mirage of recovery

Are Indian Bank Stocks a Good Bet Now?

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According to an article in one of the India’s business newspapers, Indian bank stocks are being bought heavily the government-owned insurance company, Life Insurance Corporation of India (LIC). This bodes well for Indian bank ADRs such as ICICI Bank’s IBN and HDFC Bank’s HDB.

The main stock market index of India, Sensex returned an incredible 68.98% in 2007.
But gave back most it in 2008 with a loss of 61.18%. As of the end of first quarter the index is down just 3.29%.As of April 29, it is up by 23.50% in the past 3 months.

As foreign investors continue to pull out of Indian equities, the insurer has been increasing stakes in many bank stocks as shown by the chart below:

India Banks

Source: The Hindu Business Line, India

Note: FII denotes Foreign Institutional Investors

With a huge asset base, India’s largest insurer is a major investor in many banks and other domestic companies. As governments in many western countries continue to bailout many financial institutions, the government of India seems to have taken an indirect route to supporting the banks.The article quotes an analyst as saying “Some banks, especially those in the private sector, have grown by leaps and bounds in the last few years. They have now become systemically important. So, it makes eminent sense for the Government to have a foothold in the banks via the State-run insurance company,”

The above chart shows that the insurer has raised its holdings in HDFC Bank (HDB) much more than ICICI Bank (IBN) in 2009. ICICI and HDFC are the first and second largest private-sector banks in India and they are also constituents in the Sensex index.Currently IBN offers a 2.51% yield and has a market cap of $11.4B. On April 25th, the bank reported a 35% fall in profits in the fourth quarter over the same period last year. HDFC Bank (HDB) has a dividend yield of just 0.79%. The stock is expensive on a relative basis with a PE of 21.81. On April 31, the bank reported a 34% jump in fourth quarter profit. While the interest income, commissions and fees increased the bank’s provision for loan losses also increased indicating a deterioration in its loan portfolio.