Investor cash flees Canada for foreign countries

Oil price drop plays havoc with Canadian currency, GDP and investors are now fleeing Canada at a record rate

Investor cash flees Canada for foreign countries

World Bulletin / News Desk

Investors are fleeing Canada and taking their cash with them faster than from any other country in the developed world as the oil boom continues to go bust, financial experts reported Monday.

“This is Canadian investors that are pushing money abroad,” Alvise Marino, a foreign-exchange strategist at Credit Suisse Group AG in New York, told Bloomberg News.

Measured against the country’s various figures including trade, Canada’s GDP showed an 8 percent deficit from a surplus of 4 percent for the 12 months ending in June, said foreign-exchange strategist Kamal Sharma at the Bank of America Merrill Lynch, making it the fastest one-year drop among 10 major developed nations.

It gets worse. Data shows companies and mutual-find investors continued the downward spiral in the second half of 2015, suggesting weak demand for Canadian currency and the country’s assets.

The loonie, nickname for the Canadian dollar, has fallen 11 percent in 2015. Falling crude oil prices are the culprit.

The decline in price has put the brakes on major projects in Canada’s oil sands, where it is very expensive to extract oil.

Royal Dutch Shell put its Carmon Creek drilling project on hold last week, bringing to 18 the number of abandoned projects, said ARC Financial Corp.

“The policy in Canada the last 10 years has greatly favored investments in energy,” Marino said. “Now the drop in oil prices made all that investment unprofitable.”

In the face of the country’s economic gloom, Canadian companies are looking elsewhere for acquisitions.

The Royal Bank of Canada is about to close a deal Monday to purchase Los Angeles-based City National Corp.

The US$5.4 billion takeover is the largest takeover in the bank’s history and part of the $73 billion that has left Canada for mergers and acquisitions outside of the country, Credit Suisse data shows.  

While the weaker loonie bolsters manufacturing and service exports, the improvement has not been enough to climb to the levels experienced before the global financial crisis, said Elsa Lignos, a foreign-exchange strategist with Royal Bank.

A Bloomberg survey of economists anticipated that Canada this week would post its 12th straight merchandise trade deficit.

 

 

Last Mod: 03 Kasım 2015, 08:54
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