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Research and analysis roundup from The Globe and Mail’s market strategist Scott Barlow

BMO economists noted an interesting trend whereby Toronto residents are increasingly leaving the city for more affordable pastures while housing prices continue to rise,

“Though out-migration in Toronto has stabilized somewhat at around 48,000 in the past three years, that’s still three times the outflow of the mid-00s. Notably, many young families with children are fleeing the region. The near majority (47.5% in 2019) of the outmigration is comprised of children under 15 and persons aged 25 to 39.”

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“@SBarlow_ROB "Though out-migration in Toronto has stabilized somewhat at around 48,000 in the past three years, that’s still three times the outflow of the mid-00s" – (research excerpt, chart) Twitter

***

CIBC rate strategist Ian Pollick recommends that investors buy longer-dated bonds on any weakness (my emphasis),

“We remain better buyers of duration on any sell-off. Incoming data continues to disappoint domestically and the potential for a ‘risk off’ accident is rising as the damage to global supply-chains [from coronavirus] becomes clearer. We prefer owning the belly in Canada as terminal remains mispriced, in our view.

“@SBarlow_ROB CM recommends buying duration on any dips” – (research excerpt) Twitter

***

Nomura’s widely-respected chief economist Richard Koo published a report Tuesday indicated that the coronavirus could be a catalyst for global investors to recognize China’s structural economic issues,

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“The virus’s initial spread can be blamed at least in part on the Chinese authorities’ botched response, which was rooted in a characteristic of every autocratic state: the time it takes for accurate information to reach the top of the power structure… Moreover, the virus struck at a time of trade frictions with the US, when Chinese wages had risen just far enough to put the nation in danger of falling into the so-called middle-income trap. That has almost certainly increased China’s perceived “country risk” from a corporate perspective … Finally, China’s working-age population began to decline in 2012, birthrates continue to set new lows, and automobile sales remain in a sustained decline.’

“@SBarlow_ROB Koo: "Chinese economic recovery may be much weaker than expected"’ – (research excerpt) Twitter

“ Adidas says business activity in China has tanked roughly 85% due to coronavirus” – CNBC

***

In a separate Nomura report, economist David Wagner noted a distinct decline in global investor appetite for Canadian securities (my emphasis again),

“There were net outflows of C$9.6bn from Canadian securities in December … after net outflows of C$1.8bn in November… Within fixed income markets, outflows were concentrated in provincial government bonds (-C$8.1bn), while foreigners also sold Canadian corporate bonds (by -C$4.5bn)… Foreign net selling of Canadian equities continued for the third consecutive month (although driven exclusively by net retirements of shares), bringing 12m rolling net inflows to CAD$3.2bn, the weakest pace since 2015 … the headline improvement in foreign flows into Canadian bonds in 2019 (CAD$36bn of inflows vs. CAD$11bn in 2018) masks foreigner’sstill significantly weak interest for CADdenominated bonds (-CAD$1bn of outflows in 2019, vs. -CAD$31bn in 2018), while USD denominated bonds saw a pick-up in foreign buying (to CAD$14bn in 2019 vs. CAD$2bn”

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It’s an under-covered fact that global investors are far more interested in US-dollar denominated Canadian bonds than loonie-denominated issues.

“@SBarlow_ROB Nomura: Global investors sell Canadian bonds and equities” – (research excerpt) Twitter

***

Diversion: I really enjoyed Station Eleven by Canadian author Emily St. John Mandel “ 8 Sci-Fi and Fantasy Books to Read (or Re-Read) Before Their Adaptations Hit the Screen” – Gizmodo

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