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Ian Kennedy  -  Nov 05 10:16 AM 7 Posts 0 Followers 0 Following
How important is China to the Canadian Equity Markets?
The Canadian Equity Markets are heavily weighted to Resource Stocks. I have been thinking about that in the context of both the economic problems faced by the ‘Developed Countries’, and the continuing high report GDP growth rates in China – and have been reflecting on how tied the Canadian Equity Markets are to Chinese Growth given the importance of the resource sectors to the Canadian Markets.
Topics:   China, Chinese Growth, Canadian Equity Markets
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Ian R. Campbell  - Nov 05 01:18 PM26 Posts0 Followers0 Following
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A November 5, 2021 article titled ‘Is Canada A Play On China’ (http://goo.gl/Hfs9p) follows from a presentation earlier this year made Murray Leith, VP and Director, Investment Research, Odium Brown Limited, Vancouver.  Mr. Brown apparently raised this is as ‘a topic to be thought about’.  The article’s author  says that Canada is not a ‘play on China’.  From my perspective, to suggest that 'Canada is a play on China' is too broad a conclusion, but may be partially correct in respect of some specific Canadian companies. I say this because I believe, if one were to drill down and segment the Canadian equity markets by resource type (precious metals, base metals, oil & gas, potash, etc., there are segments (base metals and potash, for example) that may well be strongly influenced by China in the near and long term. In essence, I don’t believe as a general statement that ‘Canada is a ‘play’ on China’.  I do think that there may be segments of the Canadian Equity Markets (e.g. base metals, potash) that in part may be a ‘play on China’, but I think the question needs to be addressed not from 20,000 feet, but rather from 1,000 feet.


To put this in perspective, of the approximate 1,600 companies currently included in the StockResearchPortal.com database, about 75% of them are mining companies (explorers and producers) and 25% of them are Oil & Gas companies.  Collectively, these companies represent something less than 50% of the total number of companies listed on the Toronto and Toronto Venture Stock Exchanges.  Of the Mining Companies, somewhat over 50% are gold explorers or producers, and between 15% - 20% are primarily base metals explorers or producers.  These base metals companies operate all over the world, although they are listed on the Canadian exchanges and rely on the Canadian Capital Markets to assist them with financing their operations.  It is because of these ‘company type’ relationships, and where the companies physically operate, that I think it is far to simplistic a statement to suggest ‘Canada is a ‘play’ on China’.  However, I do think that anyone who invests in listed base metals explorers and producers and fertilizer producers (whether listed on the Canadian exchanges or not) should keep a constant watchful eye on Chinese growth and growth prospects.  This is because I think China’s development has to have an influence on the price of the underlying commodities those companies are looking to find and produce.
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