Author: Consultant

Taiwan’s trade with China is far bigger than its trade with the U.S.

• Mainland China and Hong Kong accounted for 42% of Taiwan’s exports last year, while the U.S. had a 15% share, according to official Taiwan data accessed through Wind Information.
• About 22% of Taiwan’s imports last year came from mainland China and Hong Kong, versus 10% from the U.S., official data showed.
• Many Taiwan-based companies operate factories in mainland China. In 2021, Taiwan businesses received $200.1 billion in U.S. export orders, according to the U.S. Congressional Research Service.

https://www.cnbc.com/2022/08/05/taiwans-trade-with-china-is-far-bigger-than-its-trade-with-the-us.html

Wealthsimple growth stalls in second quarter

Wealthsimple Technologies Inc.’s explosive growth over the past few years that propelled the bank challenger to become one of Canada’s most highly valued startups has stalled as the company attempts to manage through a worsening economy and this year’s selloff in public equities and cryptocurrencies.

Data published Friday by Wealthsimple’s largest shareholder, IGM Financial IGM-T -1.14%decrease, shows that Wealthsimple’s clientele, excluding clients of its tax service, grew just 2 per cent over the course the second quarter ended June 30, to 1.7 million accounts, compared to the end of March. Growth in the first half was 10.4 per cent.

By contrast, the number of accounts at Wealthsimple jumped by 19.4 per cent in the second quarter of 2021, and by 117 per cent in the first half of last year. Wealthsimple’s clientele increased by 173 per cent in all of 2021, more than tripling in 2020.

The slowdown came as Wealthsimple, one of the most prolific advertisers in the Canadian financial services space, slashed its marketing budget and cut jobs in the quarter.

Wealthsimple’s assets under management, meanwhile, dropped by 13 per cent from March 31 to June 30 this year, to $16.9-billion, according to IGM. That reflects a challenging environment for asset managers; IGM, which owns IG Wealth Management and Mackenzie Investments, saw assets under management and advisement drop by 9.8 per cent to US$242.1-billion from the end of March to June 30. IGM CEO James O’Sullivan said on a conference call with analysts Friday that investment industry redemptions exceeded sales by $21.7-billion in the quarter, making it “unfortunately the worst Q2 on record.”

The Wealthsimple data accompanied news that IGM, which is controlled by Power Corp. of Canada, had slashed the valuation of its 24 per cent holding in Wealthsimple, to $492-million as of June 30, down 47-per-cent drop from its $925-million carrying value on March 31.

IGM now carries its Wealthsimple stake at 42.6 per cent of its $1.153-billion valuation last Dec. 31. Power Corp. POW-T -0.80%decrease, whose affiliated entities collectively control Wealthsimple, will reveal the impact of Wealthsimple on its balance sheet when it reports earnings after markets close Friday.

IGM chief financial officer Keith Potter told analysts the Wealthsimple devaluation “reflects a continued decline in what we saw in public peer valuations during the quarter” as well as Wealthsimple’s “revised revenue forecasts.” He pointed out that even with the valuation change, IGM’s average return on the investment to date exceeds 40 per cent, including $300-million his company got when it sold part of its stake last year.

Mr. O’Sullivan said IGM remained “long-term supportive of Wealthsimple,” which he said “should be deeply proud of 1.7 million clients. That’s a big number in Canada.” But he was noncommittal when asked by an analyst if IGM would provide further funding for Wealthsimple, an unprofitable company that has relied on outside funding, largely from IGM and other Power affiliates. “It’s just very difficult for us to say what the future might look like,” he said.

Even with the latest markdown, IGM has cut the value of its stake by less than the 80-per-cent-plus drop in the stock price of Wealthsimple’spublicly traded American analog, Robinhood Markets Inc. HOOD-Q -5.79%decrease, whose stock has sold off by more than 80 per cent from its 52-week high.

Wealthsimple launched as a robo-advisor in 2015, providing automated wealth management services over the internet to a millennial-focused audience. It began to shift to other financial services in 2018, adding a high-interest savings account and tax-filing service in an effort to build what CEO Mike Katchen has called “the financial institution of choice for the future majority of Canadians.”

But the biggest driver of growth became its online digital stock-trading platform, Wealthsimple Trade, which offered direct access to cryptocurrencies and zero-trading commissions. Wealthsimple experienced a surge in new retail clients throughout the pandemic and was one of Canada’s top beneficiaries of soaring valuations and investor interest in tech companies, increasing assets under management by more than 90 per cent, on average, in each of the past three years.

Millennials flocked to upstart trading platforms particularly in the past two years to buy into meme stocks and cryptocurrencies, and in May, 2021, Wealthsimple became one of Canada’s most highly valued private technology companies when it raised $750-million at a $5-billion valuation. At the same time, Wealthsimple pulled back on its global ambitions, selling its nascent businesses in the United States and United Kingdom last year to focus on Canada.

Both Robinhood and Wealthsimple have been hit by bad news this year. Robinhood this week said it would cut its head count by 23 per cent – its second job cut of the year – and revealed in its second quarter report it had experienced a drop in monthly active users and assets under custody.

Meanwhile, Wealthsimple laid off 13 per cent of its work force in June. Mr. Katchen said at the time clients were now “living through a period of market uncertainty they’ve never experienced before.”

In an emailed statement to The Globe and Mail, Wealthsimple spokeswoman Rachael Factor said: “Earlier this year, we made the decision to significantly reduce our growth marketing spending, in order to concentrate our resources on what’s most important in today’s environment. Our focus right now is on our clients: deepening their engagement with us and helping them navigate a difficult time in the financial markets. At some point markets will rebound – they always do – and we’ll respond accordingly.”

The $5-billion valuation afforded to Wealthsimple last year provided the strongest validation to date of Power’s evolution from a staid owner of traditional financial services companies into one of the biggest supporters of upstart digital bank challengers targeting underserved millennials and small businesses.

However, soaring valuations for Power-backed companies, including Wealthsimple and Koho Financial Inc., made Power’s stakes so large on paper that they became a material part of its holdings. Increasingly, Power’s fortunes were tied to the more volatile and risky startups rather than core anchors such as IGM and Canada Life.

The arrival of rising interest rates prompted by soaring inflation, plus the hangover from a pandemic-era spike in values of digital companies, has led to a broad-based drop in valuations for tech stocks.

Canada sheds jobs again, but unemployment rate holds at record low

Canadian employment fell for a second consecutive month in July, but the unemployment rate held steady at a historic low, a sign that labour market conditions remain tight.

Employers shed 31,000 positions last month, following a decline of 43,000 in June, Statistics Canada said in a report on Friday. Financial analysts on Bay Street were expecting a stronger return of 15,000 jobs added. Despite the decline, the unemployment rate remained at 4.9 per cent – the lowest in nearly five decades of comparable data – as fewer people sought work.

“At the headline level, we’ve definitely shifted gears to neutral,” said Brendon Bernard, senior economist at job-search site Indeed Canada.

While the Canadian labour market is stalling, the United States is surging ahead. American employers added 528,000 jobs in July – far more than expected – and the unemployment rate fell to 3.5 per cent, the lowest in 50 years. The figures bolster the case that the U.S., despite two quarters of economic contraction to start 2022, is not mired in a recession.

With the latest hiring binge, U.S. employment has returned to pre-pandemic levels, a milestone that Canada reached in late 2021.

Several analysts said Friday that the Bank of Canada was unlikely to alter its rate-hike cycle, despite the loss of momentum in hiring. This year, the bank has raised its policy rate to 2.5 per cent from 0.25 per cent, part of its continuing battle against the highest inflation in decades.

“The Bank of Canada will likely focus on the historic low unemployment rate and still strong wage growth to justify another non-standard rate hike at its next meeting” in September, said Andrew Grantham, senior economist at CIBC Capital Markets, in a note to investors.

Friday’s report showed job losses that were highly concentrated. The number of public-sector employees fell by 51,000. Ontario shed about 27,000 workers. And the losses were entirely in service industries, such as wholesale and retail trade, health care and education.

“What’s not entirely clear yet is whether the pullback in jobs is due to a lack of demand for workers – a slower economy – or a lack of supply of workers,” said Bank of Montreal chief economist Doug Porter in a note to clients.

On the demand side, there are conflicting signals. Some high-profile companies are cutting jobs or suspending plans to increase head count, citing the economic slowdown and rapidly increasing interest rates. Shopify Inc. said last week it was laying off about 10 per cent of its work force, largely because e-commerce sales aren’t growing as quickly as projected.

However, layoff rates in the broader economy have been subdued this year, said Mr. Bernard. Furthermore, some companies aren’t tapping the brakes on expansion, despite the economic headwinds.

“We have taken steps to materially increase our hiring capacity in a challenged people market such as this,” Michael McCain, the chief executive officer of Maple Leaf Foods Inc., said on an investor call on Thursday. “The old suite of hiring tactics simply isn’t adequate, and we are accelerating our activity.”

Employers were recruiting for about one million positions in May, near all-time highs, according to the most recent Statscan figures. More recently, the volume of job listings on Indeed has faded, though is still substantially higher than before COVID-19. It’s “not a dramatic shift in employer hiring appetite, more so an easing,” Mr. Bernard said of the Indeed numbers.

A potential concern for companies is that worker supply is dwindling. The labour force participation rate – the proportion of people either working or searching for a job – has fallen to 64.7 per cent in July from 65.3 per cent in June. Participation has fallen in all age brackets.

With a tight supply of labour, wages are growing quickly – although not as fast as inflation. In July, the average hourly wage rose 5.2 per cent on an annual basis, matching the rate in June. Consumer prices grew at an annual rate of 8.1 per cent in June, the highest in nearly 40 years.

At midday: Stocks fall as hot U.S. jobs report sparks rate hike jitters

Canada’s resource-heavy main stock index fell on Friday and was set to end the week lower, as energy stocks posted steep weekly losses, while fears of an aggressive policy tightening path by central banks weighed on global sentiment.

In morning trade, the Toronto Stock Exchange’s S&P/TSX composite index was down 15.14 points, or 0.08%, at 19,561.9.

The index took cues from the global markets as U.S. and European stocks declined after stronger-than-expected U.S. jobs data fueled expectations for a 75-basis-point rate hike at the Federal Reserve’s September meeting.

Meanwhile, Canada’s economy unexpectedly lost jobs for the second month in a row in July after a year-long boom, but analysts predicted that this would not stop the Bank of Canada from hiking interest rates to fight inflation.

“While today’s figures muddy the waters further for policymakers, the Bank of Canada will likely focus on the historic low unemployment rate and still strong wage growth to justify another non-standard rate hike at its next meeting,” said Andrew Grantham, senior economist at CIBC Capital Markets.

The Canadian central bank raised rates by a hefty 100 basis-points last month in a bid to tackle soaring prices and said more hikes would be needed.

Weighing on the index, the rate-sensitive technology stocks fell 0.7%.

The materials sector, which includes precious and base metals miners and fertilizer companies, lost 0.3% as gold futures fell 1.0% to $1,769.9 an ounce.

The resource-heavy Toronto benchmark index was set to end the week 0.8% lower dragged down by an 8.1% weekly drop in energy stocks, as oil prices pulled back on concerns over a possible recession and a fall in fuel demand.

Among individual movers, Canopy Growth Corp slumped 6.8% on posting another core loss, denting investor hopes that the cannabis producer would turn profitable anytime soon.

TC Energy Corp fell 4.8% after saying on Thursday it had struck a deal with a Mexican state utility to develop a $4.5 billion natural gas pipeline.

On Wall Street, technology stocks were bearing the brunt of the selloff.

U.S. employers hired far more workers than expected in July, the 19th straight month of payrolls expansion, with the unemployment rate falling to a pre-pandemic low of 3.5%.

The report provided the strongest evidence yet that the economy was not in recession.

“It is a blockbuster number, clears the path for the Fed to continue with the hawkish viewpoints that have been expressed recently. I think a 75 basis points hike in September is most likely,” said Dean Smith, chief strategist at FolioBeyond.

“There was such a strong urge for people to call the all clear on inflation and we are just not there. Inflation is becoming more embedded and it is actually accelerating, not decelerating.”

The growth index, which houses technology and related stocks, fell as U.S. Treasury yields extended their rise after the report. Shares of Tesla Inc and Amazon.com were down 2.2% and 1.3%, respectively.

Several policymakers have this week said the central bank remained determined to stick to its aggressive policy tightening stance until it saw strong and long-lasting evidence that inflation was trending toward the Fed’s 2% goal.

Markets are now pricing in a 65.5% chance of a 75 basis point rate hike in September, up from 40% before the data. The central bank has already increased rates by 2.25 percentage points so far this year.

Worries about a surge in borrowing costs, the war in Ukraine, Europe’s energy crisis and COVID-19 flare-ups in China have rattled equities this year and prompted analysts to adjust their earnings expectations for corporate America.

However, a largely upbeat second-quarter earnings season, coupled with a strong batch of economic data, has helped the S&P 500 bounce back nearly 13.6% from its mid-June lows after a rough first-half performance.

“(Today’s data) is another solid reminder that we are not in a recession and likely recession isn’t anywhere,” Ryan Detrick chief market strategist at Carson Group said.

“That’s probably still more of a positive thing than not, no matter what Fed policy is … that’s still a major tailwind eventually for equities to continue to bounce back this year.”

At 9:45 a.m. ET, the Dow Jones Industrial Average was down 134.01 points, or 0.41%, at 32,592.81, the S&P 500 was down 27.03 points, or 0.65%, at 4,124.91, and the Nasdaq Composite was down 135.90 points, or 1.07%, at 12,584.68.

Lyft Inc rose 4.6% as the ride-hailing firm forecast an adjusted operating profit of $1 billion for 2024 after posting record quarterly earnings.

Block Inc fell 2.8% as the digital payments company reported a loss in quarterly results on waning interest in cryptocurrencies.

Declining issues outnumbered advancers for a 3.25-to-1 ratio on the NYSE and for a 2.30-to-1 ratio on the Nasdaq.

The S&P index recorded three new 52-week highs and 30 new lows, while the Nasdaq recorded 11 new highs and 28 new lows.

U.S. job growth beats expectations; unemployment rate fall 3.5%

U.S. employers hired far more workers than expected in July, with the unemployment rate falling to a pre-pandemic low of 3.5%, providing the strongest evidence yet that the economy was not in recession.

Nonfarm payrolls increased by 528,000 jobs last month, the Labor Department said in its closely watched employment report on Friday. Data for June was revised higher to show 398,000 jobs created instead of the previously reported 372,000.

That marked the 19th straight month of payrolls expansion. The unemployment rate was at 3.6% in June.

Economists polled by Reuters had forecast payrolls rising by 250,000 jobs and the unemployment rate steady at 3.6%. Estimates ranged from as low as 75,000 to as high 325,000 jobs.

The employment report painted a picture of a fairly healthy economy muddling despite back-to-back quarters of contraction in gross domestic product. Demand for labor has eased in the interest rate sensitive sectors like housing and retail, but airlines and restaurants cannot find enough workers.

Strong job growth could keep pressure on the Federal Reserve to deliver a third 75 basis point interest rate increase at its next meeting in September, though much would depend on inflation readings. The U.S. central bank last week raised its policy rate by three-quarters of a percentage point. It has hiked that rate by 225 basis points since March.

The economy contracted 1.3% in the first half, largely because of big swings in inventories and the trade deficit tied to snarled global supply chains. Still, momentum is slowing.

The National Bureau of Economic Research, the official arbiter of recessions in the United States, defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators.”

With 10.7 million job openings at the end of June and 1.8 openings for every unemployed person, the labor market remains tight and economists do not expect a sharp deceleration in payrolls growth this year.

Average hourly earnings increased 0.5% last month after rising 0.4% in June. That left the year-on-year increase in wages at 5.2%. Though wage growth appears to have peaked, pressures remain. Data last week showed annual wage growth in the second quarter was the fastest since 2001.

Parkland Delivers Record Quarterly Results And Increases 2022 Guidance; Announced Share Exchange For The Remaining 25 Percent Of Sol

• Q2 2022 Adjusted EBITDA¹ of $450 million
• Q2 2022 Net Earnings of $81 million, or $0.52 per share
• Q2 2022 Adjusted Earnings¹ of $166 million, or $1.07 per share
• Increases 2022 Adjusted EBITDA Guidance¹ to between $1.6 and $1.7 billion
• Announced agreement to issue 20 million Parkland common shares to consolidate our 100 percent ownership of Sol, our International Segment

https://www.prnewswire.com/news-releases/parkland-delivers-record-quarterly-results-and-increases-2022-guidance-announced-share-exchange-for-the-remaining-25-percent-of-sol-301600488.html

Pembina Pipeline’s Profits Rise On Higher Crude, Natural Gas Prices

 Pembina Pipeline Corp. says it earned $418 million in the second quarter, reflecting higher natural gas liquids (NGL) and crude oil prices and margins, as well as rising volumes on its key pipeline systems.

The Calgary-based energy infrastructure company says its profit works out to 69 cents per diluted common share, up from $254 million or 39 cents per diluted common share in the second quarter of 2021.

Pembina Pipeline reported second-quarter revenue of $3.1 billion, up from $1.9 billion in the prior year’s quarter.

The company also adjusted its earnings guidance for the full year 2022 to between $3.575 billion and $3.675 billion, compared to a previously forecast range of $3.45 billion to $3.6 billion.

Pembina says its second quarter was positively impacted by higher volumes and higher tolls on certain pipeline systems.

But its overall pipeline volumes of 2.5 billion barrels of oil equivalent per day reflected a six per cent decrease year-over-year. The company says this was largely due to the bankruptcy filing of the Houston-based Ruby pipeline, in which Pembina owns a 50 per cent stake along with Kinder Morgan Inc.

This report by The Canadian Press was first published Aug. 4, 2022.

Brookfield Renewable Announces Strong Second Quarter Results

Brookfield Renewable Partners L.P. (TSX: BEP.UN; NYSE: BEP) (“Brookfield Renewable Partners”, “BEP“) today reported financial results for the three and six months ended June 30, 2022.

“The business performed well this quarter, as we delivered strong financial results, commissioned 1,000 megawatts of development, and deployed and committed $3 billion into growth initiatives,” said Connor Teskey, CEO of Brookfield Renewable. “Given the depth of our operating capabilities, globally diverse asset base, and strong access to capital, we are well positioned in all market environments to be a partner of choice in helping governments and businesses achieve their goals of low-cost energy, net-zero, and energy security.”

https://www.globenewswire.com/news-release/2022/08/05/2493093/0/en/Brookfield-Renewable-Announces-Strong-Second-Quarter-Results.html

Saputo Reports Net Earnings Of $139 Million

MONTREAL — Dairy giant Saputo Inc. says it had net earnings of $139 million for the quarter ended June 30, up from $53 million for the same quarter last year.

Chief executive Lino Saputo says the company has navigated inflationary pressures by raising prices, booting productivity and undertaking cost containment initiatives.

Saputo says in a statement that the company could see improved margins as input costs stabilize and efficiencies and “price realization” continue.

Revenue for the company’s first quarter of fiscal 2023 amounted to $4.3 billion, up from $3.5 billion in the same quarter last year.

Adjusted net income came in at $161 million, or 39 cents per share, up from $122 million, or 30 cents per share.

The company says it expects continued inflation pressures ahead on both product inputs and on logistic costs but that it will minimize the effects by raising prices as necessary.

This report by The Canadian Press was first published August 4, 2022.