Thursday, June 28, 2012

Canada's Manulife Financial Expands Deeper into Asia via Cambodia. Poised to Have $4 Billion in Income by 2015.

Canada's Manulife Financial (TSE: MFC) spreads expands its Asian business and plans to reach $4 Billion in net income by 2015. This report, from Bloomberg, notes that Manulife will be opening an office Phnom Penh, Cambodia, its first in the Southeast Asian nation.

Manulife has recently been searching for broad expansion opportunities in Asia as the market is currently underserved by insurance corporations, unlike at home in North America, where the market is largely saturated. Currently, Manulife is the owner of Boston-based John Hancock Financial, as well as insurance businesses in Hong Kong, China, Malaysia, Vietnam, and Japan.

Regarding Cambodia, Manulife officials state:

“We see an emerging middle class here... These are people starting families with steady jobs, fairly good jobs, where the average age is 25.”

This is in stark contrast to the North American market where the rapidly aging population provides insurance companies with little room for base expansion. Also, in a wise move, the company has decided to begin by offering basic term-life insurance plans to Cambodian consumers, which should feed them a steady stream of premium income with less risk.

At present levels near the $10 range, Manulife yield almost 5% per annum, which for the Intelligent Investor is a good steady stream of dividend income.

Asian Governments See Canada's Natural Gas Resources as Very Cheap. Petronas to Pay 77% Premium for Progress.

Petronas Energy of Malaysia is going to pay a 77% premium, or $5.5 Billion for Canada's Progress Energy. Foreign companies like Petronas are racing to secure Canadian natural gas properties, and build a Liquefied Natural Gas facility on the country's west coast in British Columbia.

One the Progress' key owners is the Canada Pension Plan, and they have already signed-on to the deal, which indicates that most others will follow, and that it is doubtful that this deal will be held-up by the Federal Government.

Officials for Petronas state that:

"The proposed transaction will combine Petronas’ significant global expertise and leadership in developing LNG infrastructure with Progress' extensive experience in unconventional resource development to build a strong and growing world class energy business based in Canada."

Undoubtedly, the purchase is a boon for shareholders of Progress, and most of them will side with the deal and choose to tender their shares. 

What does this announcement mean for the Intelligent Investor? In the eyes of energy hungry Asian government's, Canada's natural gas supplies look abundant and severely undervalued at present levels. At about $20 per share, and with a fat dividend yield of almost 4% per annum, Canada's EnCana Corp. is also looking like a deep value play (TSE: ECA) (NYSE: ECA).

Questions or comments? Leave them below : ) 

Wednesday, June 27, 2012

What Country has the Highest Stock Market Returns Since 1900? Australia and Canada Near the top of the List. Here is a Way to Invest.

Banking giant Credit-Suisse highlights Australia as the stock market with the highest real return over the last 112 years. The country, blessed with vast amounts of natural resources and fantastic weather, boasts an average annual real rate of return of 7.2%. Over the same period, Canadian stocks have returned 5.7% per year, which is also above the world-wide average of global stocks. The global average return for stocks since 1900 has been 5.4% per year.

The Australian Stock Market, or ASX, is now the sixth largest equities market in the world, and the nation boasts one of the world's highest rates of "economic freedom," according to the Heritage Foundation. Currently, half of the Australian stock market is composed of banks and mining companies, which is very similar to the Canadian stock market, with the exception of our preponderance of oil and gas stocks. Big names include companies like BHP Billiton and the Commonwealth Bank of Australia.

With Australian Debt to GDP levels for 2012 at around 23%, the country is also in excellent financial shape. So what can the Intelligent Investor do with this information? Focus some of your international exposure on Australia. 10% of a portfolio could be invested in a basket of Australian stocks by buying a exchange traded fund (ETF). One such ETF trades under the ticker (EWA) on the NYSE. Over the last year the iShares MSCI Australia Index Fund has declined by about 13% and represents a good value at today's level.

Leave your comments or questions below and I will be sure to reply.

Monday, June 25, 2012

Search Wider to Profit from Natural Gas. Asian and North American Price Differentials Present an Interesting Opportunity.

Trying to profit in natural gas is difficult. The United States Department of Energy estimates that production of natural gas liquids hit a high in March and is now 50% above production levels in 2009. As a result, prices of some natural gas liquids have plummeted by 60%. Natural gas producers are becoming strapped for cash and there is now a lot of uncertainty about the viability of another of natural gas properties throughout North America. 

This is actually good news, however, for some chemical manufacturers that may need to use natural gas liquids, such as butane, in their processes. Examples of such companies include Dow Chemical (NYSE: DOW) and Dupont (NYSE (DD). 

The market for natural gas, however, is not the same throughout the world. While in North America supplies have spiked and prices have plummeted due to basic supply and demand dynamics, Asian prices have increased over 30% in the last year. Demand for Natural Gas Liquids in Japan, China, and India have all increased for 2011, meaning there is a huge spread between North American and Asian prices.

Essentially, if a North American producer can develop the terminals and infrastructure necessary to ship the natural gas liquids overseas, they will profit handsomely. Statoil (STO) out of Norway is a very interesting and reliable choice in this area. They currently have the only LNG production facility in Europe, and they have a terminal in Singapore, and soon Malaysia as well. This will bode every well for future cash flows.

Conclusion: For the Intelligent Investor, natural gas prices are making it very difficult for North American natural gas producers, but for those interested in profiting from the current low-price environment, try Statoil or other producers that have the capacity to profit from the differential between prices in Asia and Europe or North America.

Thursday, June 21, 2012

If you’re considering buying a new home or refinancing/renewing your current mortgage, it would be a wise to carefully consider the following changes that will take effect on July 9th, 2012.

The Federal Government announced this morning four new clampdowns on insured mortgages that will quickly come into effect. The federal government's changes include:

  1. Reducing the maximum amortization period to 25 years from 30 years.
  2. Reducing the maximum amount of equity homeowners can take out of their homes when refinancing to 80% from the current 85%.
  3. Limiting the availability of government-backed mortgages to homes with a purchase price of more than $1 million.
  4. Fixing the maximum gross debt service ratio at 39% and the maximum total debt service ratio at 44%.

The first two changes will have the biggest impact on Canadian borrowers and real estate investors.

If you’d like to review your options or if you have any questions, please give me a call or send me an email, and I’ll be happy to discuss how these changes may affect your personal situation.

Wednesday, June 20, 2012

CIBC is estimating that the Canadian economy will barely keep its head above water over the course of the next year. The national economy is expected to grow at 2.1%, and along with a slowing global economy, this is expected to hold interest rates low for the foreseeable future.

Canadian consumers have exhausted much of their savings and their spending has almost reached its limit. Borrowing rates are high, which leaves Canadian consumers with little room to increase spending in case wages increase in the near-term, which is very unlikely.

Personal consumption, as the largest component of GDP or gross domestic product, plays the primary role in determining our nation's growth rate. Net exports (exports - imports), however, also play a major part, and with growth in the United States at a standstill, there is little room for expansion here in the near-term.

Harper's conservative government has been trying to diversify Canada's export market through trade negotiations with China and South-East Asia, but finalizing international trade agreements takes a lot of time, and may not even contribute to net exports over the long-term, especially if imports remain high.

So what does this mean for the Intelligent Investor? Mortgage rates and borrowing terms should remain favourable for the average Canadian household, and real estate prices, as a result, should still experience some near-term support.

As always, if you have any questions or comments, post them below!