Canada's economy is in good shape and could soon overtake the UK.
According to the Centre for Economics and Business Research, Canada's economy is likely to overtake Britain's by 2015, ejecting us from the world's ten largest economies.
Ranked the world's fourth-largest economy as recently as 2005, Britain was overtaken by China in 2006, France in 2008 and Italy in 2009, reports the CEBR's chief executive Douglas McWilliams. Brazil and Russia will also overtake us sometime soon -- perhaps in 2012 -- closely followed by India. And shortly thereafter, so will Canada.
Brazil, China, Russia, India: these are familiar names, with a familiar story. The story is slightly different in each case, granted, but there will be few investors unfamiliar with the broad themes.
Rich appeal
Canada is different. Long in the economic shadow of its neighbour to the south, Canada's appeal to the investor is less obvious. But it's no less compelling, when the facts are known. I've been a fan of the country since 1974, when as a nineteen year old economics student, I travelled from Vancouver to Ontario by Greyhound bus, to spend a summer working.
Natural resources and agriculture are a big part of the appeal. Oil, gas, timber, metals and minerals: Canada is rich in all of these, as well as wheat. The demographics are good, too. Immigration has led to a young, skilled workforce, and the quality of life in cities such as Vancouver and Toronto is -- literally -- world-beating.
Most notably, Canada's economy is well-managed. Its prudent banks have emerged from the credit crunch almost unscathed, and Canada has cut public spending as a share of GDP from 53.3% in 1992 to 39.6% in 2008.
And, as Mr. McWilliams observes, while the Canadian figures for public spending as a share of GDP are now much the same as those for its larger neighbour to the south, the difference is that there is a reasonable prospect that the Canadian numbers will fall in the medium term -- whereas in the United States, the numbers are set to rise.
Taking a stake
So how do investors here in the UK grab a piece of the action? There are several options available, depending on which particular aspects of the Canadian investment story appeal most.
First, a caveat: while there are stacks of North American investment funds out there, most hold a substantial chunk of American stocks. Here, I'm considering Canada-only investments.
While none of Canada's largest businesses are quoted on the London Stock Exchange, many are quoted on New York's exchange -- and are thus available through the Motley Fool Share Dealing service, as I wrote in this article on buying overseas shares.
So, for a trading fee of just £17.50, you can buy a stake in companies such as the Royal Bank of Canada, information provider and publisher Thomson‑Reuters, aircraft manufacturer Bombardier or Blackberry manufacturer Research in Motion. Or Barrick Gold Corporation, apparently the world's largest gold mining company by production and reserves, with 27 mines worldwide.
Or perhaps it's Canada's host of small-cap energy and mining companies that take your fancy? It's Canada's natural resources story, after all, that is likely to power the country past us in the GDP stakes. Numbers of these are available on the New York market, as well as the Frankfurt exchange -- but also through London, on either the main market or AIM. Here's a list of them.
Finally, it's possible to buy Canada-only ETFs. I found four, with iShares' MSCI Canada Index Fund being perhaps the most obvious bet on the broader Canadian economy. The others are the Claymore/SWM Canadian Energy Income Index ETF, the Canadian Jantzi Social Index Fund, and the Canadian SmallCap Index Fund.
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