3 ETFs To Play Canada’s Rich Supply of Resources (EWC, ENY, FXC, RY, SU, ABX)
With its array of natural resources, supply of commodities and enviable banking system, Canada remains relatively appealing and poses an opportunity for investors.
The democratically governed nation is one of the world’s largest trading nations and is a net exporter of energy. In fact, Canada boasts the world’s second largest oil reserves, behind Saudi Arabia, as well as ample supplies of natural gas and nuclear energy. Due to its abundance of energy-related resources, the maple-leaf nation has built strong relationships with China, South Korea and other energy-hungry nations, setting itself up to witness healthy growth in the near-term future.
In addition to energy resources, Canada is the world’s largest producer of zinc and uranium and is a global source of many other natural resources such as gold, nickel, aluminum and lead. Canada is also one the world’s largest suppliers of agricultural products such as wheat, canola, other grains, fertilizers and potash. This is of relevance because as incomes in developing nations increase and populations continue to grow, demand for food, and other natural resources, will follow. In fact, most of the world’s food demand growth is expected to come from its least-developed nations.
Lastly, Canada has appeal due to the safety of its financial system. According to the World Economic Forum, Canada has the safest banking system in the world with the lowest likelihood of default. Additionally, in the realm of the global financial catastrophe, not a single Canadian bank failed and the nation is known to generally run budget surpluses. Canadian Finance Minister, Jim Flaherty, believes that one reason for the strength in his nation’s banking system to not allow foreign ownership of its nation’s banks and insurers.
In a nutshell, Canada is rich in natural resources and commodities which are expected to see increased demand and here are a few plays to the play the country:
- iShares MSCI Canada Index Fund (NYSE:EWC), which allocates nearly 31.9% of its assets to financials, 25.6% to energy and 22.1% to materials. It includes Royal Bank of Canada (NYSE:RY), Suncor Energy (NYSE:SU) and Barrick Gold Corporation (NYSE:ABX) in its top holdings.
- Guggenheim Canadian Energy Income (NYSE:ENY), which primarily focuses on the energy sector and boasts Baytex Energy Trust, Canadian Oil Sands Trust and Enerplus Resources Fund as its top holdings.
- CurrencyShares Canadian Dollar Trust (NYSE:FXC), which is a currency play on the Canadian dollar and seeks to track the movements in the price of the Canadian dollar.
Written By Kevin Grewal From ETF Tutor Disclosure: No Positions
Kevin Grewal is the founder, editor and publisher of ETF Tutor and serves as the editor at www.SmartStops.net, where he focuses on mitigating risk and implementing exit strategies to preserve equity. Additionally, he is the editor at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Prior to this, Grewal was a quantitative analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor’s degree from the University of California along with a MBA from the California State University, Fullerton. He is a contributing author on The Street – his articles can also be found published on various sites including Yahoo! Finance, The Globe and Mail , Daily Markets, MSN Money, Seeking Alpha, Fidelity Investments, Traders Library, and Minyanville.