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Market Watch Weekly - September 19, 2014

Erik Dekker - Sep 19, 2014
This week was a fairly busy week in terms of data and factors that would have an effect on the global capital markets.

This week was a fairly busy week in terms of data and factors that would have an effect on the global capital markets.


While things remained quiet on this side of the border, the economic data out of the United States was more mixed with leading indicators pointing positive and both headline and core CPI (consumer price index) prints pointing lower. The real drivers of the global capital markets this week were the news out of China that the People’s Bank of China (PBOC) was injecting 500 Billion Yuan (89 Billion CAD) of liquidity into their banking system, and the Scottish referendum vote regarding independence.


The Chinese economic statistics released this week disappointed, with industrial production, retail sales and investment all decelerating. This probably explains the PBOC injecting 500 Billion Yuan into their banking system, but it could also explain the near term headwinds commodities are seeing. Elsewhere, we learned this morning that Scotland, with just over 55% of the votes in favour, will remain part of the United Kingdom.


Next week we will be focusing on the global flash Purchasing Manager Index data releases as well as retail sales in Canada and Europe along with home sales and durable goods order data in the U.S.  We expect it to be a busy week.


Last week we were in Toronto at our annual Infrastructure conference and had the opportunity to hear several companies present on both the challenges and opportunities they see within Canada and abroad. One executive commented that existing infrastructure is failing, as anyone who has driven around Vancouver can attest to with all the bridge repair and sewer replacement work being done seemingly everywhere you look.


Larry Fink, CEO of Blackrock Investments wrote a similar commentary this week, noting that infrastructure in the U.S. is dismal, whether it was its crumbling roads, underfunded public transportation networks or power grids and sewer systems. His focus was that while traffic delays are a nuisance, they are more importantly a longer term obstacle to economic growth. The American Society of Civil Engineers seems to agree, having stated in a recent report that America’s infrastructure was “aging and unreliable” and is estimated to cost American businesses $1.2 Trillion by 2020.


Infrastructure is absolutely critical to a country’s economic health, helping to solve both short and long term economic problems. In the near term, infrastructure investment helps provide jobs for trade and other workers, leading to increased household spending. In the longer term a pipe manufacturer will be able to produce and distribute its goods more effectively and cheaply; a technology company will pay lower prices to power their servers; a school district will be able to use water more efficiently, all of which leads to business’s being able to save and invest in new equipment and technologies, creating further employment.


As many of you know, we have held both individual companies operating within this sector, such as WesternOne Equity, Stuart Olson and Finning, as well as the globally diversified Brookfield Global infrastructure Fund.


Brookfield Infrastructure Partners also recently held an investor day in New York where they outlined their current organic growth opportunities as well as the tremendous opportunities they see in Europe where they are adding airports, telecommunications and water utilities to their portfolio. We remain positive on Brookfield primarily due to the underpinning of the regulated and contracted nature of the operations they currently own and are looking to acquire.


For sports fans, this Sunday is one of the biggest games of the NFL regular season, as the Seattle Seahawks take on the Denver Broncos in a Superbowl rematch.  It will be the only game at which the Canadian anthem is performed as the Seahawks’ organization is holding a special Canadian fan appreciation night. There will be an estimated 67,000 fans in attendance at CenturyLink Field.


In local news, 87 year old Dr. Henry Sugiyama will have the chance to be a student at the University of British Columbia after having been rejected 69 years ago. The program is a new minor in Asian Canadian and Asian Migrations Studies and made its debut this fall; Sugiyama will be one of the first students in the program.  In 1945, the Canadian-born Sugiyama was a Kamloops high school student when he applied to UBC, and was rejected, despite his excellent academic record. At that time, Canada’s War Measures Act still forbid Canadians of Japanese descent from living on Canada’s West Coast. Dr. Sugiyama describes his recent acceptance into the program as an honour.


Despite grey skies and rain today, this weekend is forecast to be warm and sunny, so enjoy the nice weather before the Vancouver rains show up in full force.


Thank you for your trust.

As always, we welcome any feedback.  Have a great weekend.


The Dekker Hewett Group