Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Credit Suisse analyst Andrew Kuske considers a Canadian comeback, complete with stock ideas,
“We focus on Canada’s vaccine order positioning as appears outright and population adjusted. From our perspective, this dynamic looks to aid Canadian market performance for those looking beyond some of the near-term headwinds and truly beyond the pandemic impact… there is an underlying duality to consider, in our view: (a) purely domestic plays largely focused on a return to consumer experiences and spending – restaurants, movie theatres and selected parts of the real estate ecosystem are three specific broad examples; and, (b) the Canadian skew of stocks exposed to global commodity markets will be more reliant on the broader return to “normal” … A few ideas from our Canadian coverage team, includes: (a) Energy: in the Canadian producers/integrated names, preferred exposure is Canadian Natural Resources (CNQ); (b) Financials: in the banks, Royal Bank is preferred and Element Financial (EFN) in non-bank coverage; (c) Infrastructure: TransAlta (TA) in the Utilities and Keyera (KEY) among the energy infrastructure sub-sector; and, (d) Precious Metals: preferred exposure from Newmont (NEM) and Barrick Gold (GOLD).”
“@SBarlow_ROB CS: Stock ideas for a ‘Canadian Comeback’’ – (research excerpt) Twitter
Citi analyst Anita McBain detailed the rise in ESG fund flows in No Going Back: Investing in an ESG World — A Decisive Decade for Humanity,
“If we analyze fund flows, data from Morningstar reveals that U.S. sustainable funds attracted US$30.7 billion of net inflows in 2020 to date versus US$21.4 billion for FY2019 with an average of US$10 billion a quarter. This represents about 10% of overall U.S. fund flows. Nearly 500 actively-managed funds in the U.S. have now added ESG criteria to their prospectuses, formally conveying to investors that they use ESG in informing investment decisions. In 2020, global sustainable funds raised US$45.6 billion in the first quarter compared to an outflow of US$384.7 billion for the overall fund universe.”
The extensive report did not include investment ideas, which was an irritating omission. Nonetheless, ESG flows are likely to create a number of lucrative investment opportunities.
China is experiencing a hiccup in credit markets. The government can basically order banks and other financial firms to fix it, so I’m not about to lose sleep. However, the (very) low probability of the government losing control would be so calamitous to global markets that it’s worth investor attention,
“The recent wave of corporate bond defaults in mainland China is pushing many domestic businesses to cancel their new issuances. At least 57 companies have called off plans to issue a combined 44.2 billion yuan ($6.72 billion) of new fixed income securities in the domestic market as of Thursday, Nikkei Asia research shows… Shaun Roache, Asia-Pacific chief economist at S&P Global Ratings, has flagged financial tightening in China for the past few months. The “tightening is triggering pockets of stress in the corporate bond market,” he wrote in a report on Thursday.The tightening, if avoiding excessive stimulus, is “healthy for the economy in the long run but dampens growth this year and next,” Roache said”
“Over $6bn in bond sales canceled across China as default scare spreads” – Nikkei Asia
“Huaxin Trust Struggles as Corporate Debt Problems Spill Into Shadow Banking” – Caixing (paywall)
Diversion: “@SBarlow_ROB Please Enjoy These 2020 Award-Winning Wildlife Photos” – Gizmodo
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