Globally-Focused Companies Should Benefit from Economic Decoupling

The economic decoupling of G7 nations and the developing world means investors should favor globally-focused sectors over their domestic counterparts, says Dundee Securities strategist Martin Roberge.

Domestically-focused companies in the S&P/TSX 60 index, like ACE Aviation Holdings Inc.(ACE), Enbridge Inc.(ENB), Rogers Communications Inc. (RCI), Royal Bank (RY) and Tim Hortons Inc. (THI), returned -10% in 2008 as of March 12. Global names such as Barrick Gold Corp. (ABX), Bombardier Inc. (BDRAF.PK), Imperial Oil Ltd. (IMO) and Nortel Networks Corp. (NT) returned +2%.

Given this spread, is there any more upside to be found in this trade?

Mr. Roberge thinks there is – primarily because base metals are unloved.

Canada’s energy and gold sectors should continue their healthy streak not only due to growth decoupling between G7 and developing nations, but also because global reflationary forces are improving. China’s currency is appreciating at a quicker rate, its consumption of primary metals remains robust, there is a premium in the spot price for metals when compared to analysts’ estimates, and stocks in these sectors have attractive valuations, the strategist said in a report.

“Overall, the surprise this year should be a soft-landing in commodity prices, which has yet to be discounted in the stock price of base metal stocks,” he added.

Comments

[granger:]

thoughts on CNI?

2008 Mar 16 10:26 AM

[manohmanoh:]

Too funny that you include Nortel in the mix ... as an example of global stocks up 2% YTD ... when it is down 60%(ish) YTD ... and with a comment about base metals and commodities ... errr, okay.

2008 Mar 17 07:39 AM