C list makes the A grade

In the latest in our series on investment opportunities in the world's emerging markets, Liam Robb looks at the pros and cons of speculating in Canada, Chile and Chine

Canada

The resource base of the world's second-largest country has delivered one of the highest standards of living in the world since 1945; its 30 million population having access to cheap energy - notably hydroelectric power - and large oil and gas reserves. It is the world's largest exporter of forest products and the largest producer of zinc and uranium. The country has free access to the United States and Mexican markets via the North American Free Trade Area and 80 per cent of exports go to the US.

The Canadian equity market comprises 3,400 companies with the biggest including BCE, the telecoms company, Seagram, erstwhile sponsor of the Grand National, and the Royal Bank of . The market has risen 25 per cent over the past 12 months and Subodh Kumar, global strategist for CIBC Wood Gundy in Toronto, believes that, with IMF-predicted global growth of 4 per cent next year, this upward trend should continue. He is particularly bullish on Canadian exporters like Alcan, the aluminium manufacturer, and Macmillan Bloedel, the forestry company. The gold market, which has been flat for the past two years, may be due for a reversal of fortune in which case extraction companies like Placer Dome should benefit.

The vexed question over the future of Francophone Quebec, which has been threatening for decades to vote for independence, still dominates political debate and a referendum last year only just missed seeing the country split into two. (Crisis point was recently reached when Charles Aznavour, the French chanteur, was booed at a concert for singing in English). Such uncertainly severely dents business confidence.

Chile

Chile is the exception in Latin America for the simple reason that the economy there is on a very sound footing and has been for the past 10 years.

A free-market policy and the selling off of state enterprises at below market value led to large profits for investors in Chile earlier in the decade, yet despite being one of the first Latin American countries to implement a privatisation programme - and despite the fact that Chile was Latin America's fastest-growing economy last year with growth of nearly 9 per cent - last year was not one of the happiest for the Santiago stock exchange with the 270 companies listed losing 24 per cent of their value.

Ironically, the reason for the market's under-performance is Chile's economic excellence: the Central Bank has had to keep interest rates high in order to prevent the economy from overheating and this has kept the local pensions funds away from the market.

Wood pulp, fishing (particularly salmon farming) and fruit exports form major sectors but by far the most important is the copper industry which accounts for 35 per cent of the country's total GDP.

Stocks currently in favour with brokers include Soquimich, the fertiliser company, which produces 30 per cent of the world's iodine, and Enersis, the $4bn electrical distributor which has accumulated enough spare cash to start buying up stakes in companies outside Chile such as Cerj, the privatised Brazilian electrical utility.

China

China's relationship with the West has improved dramatically since the Tiananmen Square massacre in 1989, although, for the UK at least, concerns still remain regarding the handover of Hong Kong later in the year.

The 1.2 billion population is self-sufficient in food (China manages to feed 20 per cent of the world's population with just 7 per cent of the world's farmland), the country is the world's largest coal producer, and unexploited oil reserves in the western Tarim basin could be on a par with those in the Middle East.

However, population growth, massive under-employment (due to the gradual closure of loss-making state companies) and very poor education and transport systems are still a burden. As a result, despite being one of the world's fastest-growing economies since market reform began in 1978, the 350 companies listed on the Shenzhen and Shanghai stock exchangesperformed extremely poorly for most of last year.

Chinese companies are listed in a variety of ways. "A" shares are sold only to domestic investors and "Bs" are reserved for foreigners. "H" shares are listed on the Hong Kong stock exchange and some "Red Chips" - companies which have almost exclusive exposure to China - are listed in New York and in Hong Kong.

The prolonged market slump was due to the renewal of a ban on domestic investors owning shares which are denominated in foreign currency ("B" shares are denominated in dollars). However, these investors have recently been buying "B" shares illegally, presaging a market surge which has ensured that sterling returns are now a respectable 20 per cent.

International investors are urging Beijing to amalgamate the two forms of shares in order to avoid confusion and, providing this hurdle can be overcome, most analysts are optimistic about China's future.

Mary Whitehead, for example, who is responsible for Asian allocation at Clerical Medical pensions, is particularly bullish on the growing number of listed infrastructure companies, citing Guangdong Investments, a large property conglomerate, and Citic Pacific, a HK$7bn Red Chip in Hong Kong "which has been around so long I almost see it as a blue chip", as among her favourites.

Closer to home, the first Chinese share listing on the London Stock Exchange can be expected early next year when Beijing Datang Power Generation is scheduled to float an issue of shares worth pounds 180m.

Performance statistics, Datastream:

Numerous funds have exposure to North America, although Maxwell Meighton's Canadian General investment trust is one of the few to invest specifically in . Investment trusts include Rothschild's Five Arrows Chile fund, and Fleming's Chinese Fund. Country-specific unit trusts include Save & Prosper's China Dragon and Invesco's Hong Kong & China fundsn

In the next instalment, the `Cs' continue with Columbia and the Czech Republic, two markets which have shown staggering returns in the past but which over the past 12 months have been among the world's worst-performing stock markets.

Start your day with The Independent, sign up for daily news emails
Suggested Topics
Arts and Entertainment
Lou Reed distorted the truth about his upbringing, and since his death in 2013, biographers and memoirists have added to the myths
musicThe truth about Lou Reed's upbringing beyond the biographers' and memoirists' myths
News
people
News
Ed Miliband received a warm welcome in Chester
election 2015
Life and Style
Apple CEO Tim Cook announces the Apple Watch during an Apple special even
fashionIs the Apple Watch for you? Well, it depends if you want it for the fitness tech, or for the style
Have you tried new the Independent Digital Edition apps?
Finacial products from our partners
Property search
Don't count your retirement money yet: employers will stop receiving a pension rebate next year and their staff may lose out

Defined-benefit pension schemes: Rebate change in 2016 may leave you out of pocket

Employees in defined-benefit schemes are held up as the lucky ones, but the state pension scheme will be overhauled in April 2016
Labour will raise the national minimum wage to more than £8 an hour by October 2019 (EPA)

Barclays new Blue Rewards hands cash to customers. What’s the catch?

Joining Barclays Blue Rewards costs £3 a month but then lets customers in for handouts of up to £15 a month

New research reveals that despite the recovering economy, four out of five low-income households have seen no sign of their financial situation improving

Hard-up families could be eligible for financial help

A charity is urging anyone struggling financially to see if they could get help from the state

When is the best time to buy foreign currency?

Video: With an election looming, a hung parliament could hit sterling

General Election 2015: Vote for the party that will boost your finances

Experts warn that the general election is unlikely to lead to stable markets. Simon Read talks to two investment managers who are advising caution

Make the most of your money in 2015-16: The end of the tax year is the beginning of the next...

The new tax year brings with it a raft of new rules and regulations

General Election 2015: Will pension reform be a major factor?

Video: Tom McPhail, head of pensions at Hargreaves Lansdown, says May's outcome could alter your pension

General election 2015: David Cameron's promise brings uncertainty to investors

Video: Simon Read talks to Fidelity's Tom Stevenson

Have you won one of the £1m Premium Bonds' jackpots?

Video: The Independent's Personal Finance Editor runs you through the key facts about Premium Bonds

Give me the money: but not all providers are ready for transfers to Junior Isas

Parents will be able to switch dormant child trust funds to more competitive Junior Isa

Millions of dormant junior savings accounts were yesterday given the go-ahead to swap to better deals as the Government agreed to allow switching. Samantha Downes reports
Hard labour: a woman bears the load in a factory. But equal treatment is causing pension problems

Women to lose benefits from contracted-out pension scheme

Workers were promised that the state would pay inflation increases on parts of their pensions. But now the DWP disagrees
The Budget, says one critic, should have done more to encourage construction of affordable homes

Help for buyers but where are the homes?

A vote-winning Budget promised less tax, greater savings flexibility, and government handouts for first-time housebuyers
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

    Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

    £50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

    Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

    £13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

    Ashdown Group: Training Programme Manager - City, London

    £40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

    Day In a Page

    Armenian genocide: To continue to deny the truth of this mass human cruelty is close to a criminal lie

    Armenian genocide and the 'good Turks'

    To continue to deny the truth of this mass human cruelty is close to a criminal lie
    Lou Reed: The truth about the singer's upbringing beyond the biographers' and memoirists' myths

    'Lou needed care, but what he got was ECT'

    The truth about the singer's upbringing beyond
    Migrant boat disaster: This human tragedy has been brewing for four years and EU states can't say they were not warned

    This human tragedy has been brewing for years

    EU states can't say they were not warned
    Women's sportswear: From tackling a marathon to a jog in the park, the right kit can help

    Women's sportswear

    From tackling a marathon to a jog in the park, the right kit can help
    Hillary Clinton's outfits will be as important as her policies in her presidential bid

    Clinton's clothes

    Like it or not, her outfits will be as important as her policies
    NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

    Who's monitoring the outsourced NHS services?

    A report finds that private firms are not being properly assessed for their quality of care
    Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

    Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

    The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
    How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

    How do Greeks feel about Syriza?

    Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
    From Iraq to Libya and Syria: The wars that come back to haunt us

    The wars that come back to haunt us

    David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
    Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

    Too busy to surf? Head to The Pool

    A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
    Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

    UK's Major Tum to blast off on a spice odyssey

    Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
    John Harrison's 'longitude' clock sets new record - 300 years on

    ‘Longitude’ clock sets new record - 300 years on

    Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
    Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

    Let the propaganda wars begin - again

    'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
    Why Japan's incredible long-distance runners will never win the London Marathon

    Japan's incredible long-distance runners

    Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
    Why does Tom Drury remain the greatest writer you've never heard of?

    Tom Drury: The quiet American

    His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace