The Globe and Mail reports in its Tuesday edition that when the
loonie falls Canadian investors traditionally start to buy domestic exporting
stocks. The Globe's Scott Barlow writes that the rise of
Mexico as an exporting powerhouse
means this time, an
export-heavy investment strategy
may disappoint.
There are 34 members of the
S&P/TSX composite index with
more than 35 per cent of revenues
generated in the United States. For some, like forestry
stocks Interfor and West
Fraser Timber, there is little
competition from Mexico and
a weaker loonier will
help boost earnings. Financially
based companies like
Brookfield Asset Management
and Manulife Financial
have little to worry about from
Mexican rivals. The outlook is much less
clear for domestic companies
with both direct and peripheral
links to manufacturing and
exports. Companies such as Magna
International and ATS Automation
Tooling Systems may not
reap the same
rewards from the weaker Canadian
dollar as in times past.
A weaker loonie is
good news for Canadian exporters,
but investors will have to be more careful with stock selection.
Making sure a firm
does not compete with Mexican
manufacturers is now job
No. 1.
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