With the Canadian dollar weakening, we ask if it’s a good time to invest in the country’s manufacturing sector
With the Canadian dollar struggling at around 72 cents of a US dollar, could this be the perfect time to encourage your clients to invest in the country’s manufacturing companies?
Perhaps not if the financial advisors we have spoken to are to be believed. For while the drop in the value of the “loonie” is offering some advantages to firms that want to take on rivals abroad, there are not necessarily consistent advantages for Canada’s manufacturers.
According to George Christison, a retirement and investment planner for IFM Planning Services, the value of the currency is “a reflection of international investors’ confidence” in Canada and its possibilities in the near future. As such, he believes encouraging investments in manufacturing would be “too linear”.
Similarly, John De Goey, portfolio manager at Burgeonvest-Bick Securities Limited, believes that while the manufacturing sector is relatively attractive there is little reason to invest in Canada at the present moment.
“Canada is really the tale of two economies these days,” he said. “Alberta is being stung badly due to the drop in oil prices, but that drop in oil prices has led to a weak loonie, which has re-invigorated Canadian manufacturing. Overall, Canada’s economy remains sluggish, but the prospects for Canadian manufacturing are still better than they are for other sectors.
“Stated a bit differently, I think manufacturing will be an above-average performer in an economy that has below–average near-term prospects. My larger concern is that most Canadians have far too much money invested in Canada to begin with (home country bias), so I certainly wouldn’t rush to put more money into Canada – in any sector.”
Indeed a recent report in the centre of Canada’s manufacturing haven, Ontario, suggests that there is a lack of confidence in the sector generally. According to the Ontario Chamber of Commerce, of the businesses surveyed, just 30 per cent were confident in the province’s economy – that’s down from close to 50 per cent just four years ago.
According to the report, the province is lagging due to the number of patents it is producing and overall labour productivity.
Perhaps not if the financial advisors we have spoken to are to be believed. For while the drop in the value of the “loonie” is offering some advantages to firms that want to take on rivals abroad, there are not necessarily consistent advantages for Canada’s manufacturers.
According to George Christison, a retirement and investment planner for IFM Planning Services, the value of the currency is “a reflection of international investors’ confidence” in Canada and its possibilities in the near future. As such, he believes encouraging investments in manufacturing would be “too linear”.
Similarly, John De Goey, portfolio manager at Burgeonvest-Bick Securities Limited, believes that while the manufacturing sector is relatively attractive there is little reason to invest in Canada at the present moment.
“Canada is really the tale of two economies these days,” he said. “Alberta is being stung badly due to the drop in oil prices, but that drop in oil prices has led to a weak loonie, which has re-invigorated Canadian manufacturing. Overall, Canada’s economy remains sluggish, but the prospects for Canadian manufacturing are still better than they are for other sectors.
“Stated a bit differently, I think manufacturing will be an above-average performer in an economy that has below–average near-term prospects. My larger concern is that most Canadians have far too much money invested in Canada to begin with (home country bias), so I certainly wouldn’t rush to put more money into Canada – in any sector.”
Indeed a recent report in the centre of Canada’s manufacturing haven, Ontario, suggests that there is a lack of confidence in the sector generally. According to the Ontario Chamber of Commerce, of the businesses surveyed, just 30 per cent were confident in the province’s economy – that’s down from close to 50 per cent just four years ago.
According to the report, the province is lagging due to the number of patents it is producing and overall labour productivity.
