Canada attracting attention of global investors

While the European nation is a financial basket case that needs an estimated €20-billion ($26.42-billion) to stay afloat this year, Canada is in many ways the object of the world's desire, the popular girl with attractive assets and prudent fiscal policy everyone wants to dance with.

Barely two weeks into 2011, this frosty country has been swept up in a wave of mergers, foreign investment and international attention as the prices of commodities soar, the loonie jumps above US$1 and the economic recovery gathers steam.

Big money is moving to park in Canada. And not for the short term.

U.S. retail giant Target's announcement Thursday it will pay Hudson's Bay Co. $1.8-billion for leases so it can set up its first Canadian stores is the latest in a string of developments that has put Canada in the sights of global investors.

American mining giant Cliffs Natural Resources Inc. wants a $4.9-billion piece of Quebec's iron ore. China's $300-billion sovereign wealth fund wants to expand its Canadian holdings with a permanent presence in Toronto. U.S. bond behemoth PIMCO is expanding its reach with new funds for Canadian retail investors.

Foreign investors snapped up $97.8-billion worth of Canadian securities from January to October last year, according to the latest statistics available. That's up 10% from the previous year. Provincial government bonds are selling at record pace.

It all may be happening a bit fast, but it shouldn't be surprising.

Canada is the only one of the Group of Seven industrialized countries to have clawed back all its lost jobs and output from the recession, distinguishing it from the likes of France, the United States and Japan.

That means it has less bad baggage dragging behind it than many of its peers.

But investor interest is also being fuelled by the country's commodity exposure. It produces a lot of oil, metals and agricultural products — things that nations like China need to fuel their economies.

Commodities have been on fire since the start of December and by some measures going all the way back to last summer, said Douglas Porter, deputy chief economist with Bank of Montreal. And while resource assets like Potash Corp. of Saskatchewan Inc. may be off-limits, the recent investment influx shows the federal government's decision to block the Potash sale to BHP Billiton Ltd. hasn't scared off foreign investors.
Another element is the Canadian consumer.

Canadians never pulled back on their spending anywhere close to the level Americans did during the recession. And even now that they're burdened with record household debt, which has risen by $95-billion, or 6.7%, in the past year, they will still spend more this year, Mr. Porter contends. That's because employment is rising, borrowing costs remain low and household net wealth has rebounded. More money coming in typically means more domestic jobs.

The world needs investment safe havens and Canada is one of them at the moment.

Source: The Financial Post

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