Are You Up to Speed on the Canadian Stock Market?

The Canadian stock market differs in many ways from that in the U.S. To begin with, they are each priced in their local currency. The Canadian dollar exchange rate is about 20% under US dollars. Another impactful difference is the entire population of Canada is 1.5 million people fewer than the state of California. With one-tenth the population of the entire US, the market is not inclined to trade as deep or to have as many large companies on the main exchanges.

For a US investor looking northward, they may find that a Canadian company they are interested in has an ADR on a US exchange allowing any currency exchange to be avoided. If not, to trade in Canada they may need to open a bank account in each currency and will naturally be exposed to any currency risk relative to their native currency.

Sector Comparison

Many of the same sectors exist across the two exchanges, but there is a heavy weighting in Canada toward natural resource companies as the country is rich in oil and minerals. As a comparison of industries, this is how the two countries compare. For comparison across the border within the sectors, some recommend using price earnings to determine value, just as one would when comparing two stocks in the same dominion.

Basic Materials – Canada is 1.6 times bigger

Capital Goods – US is 6.5 times bigger

Conglomerates – US is 2.4 times bigger

Consumer Cyclical – US is 16 times bigger

Consumer Non-Cyclical – US is 8 times bigger

Energy – US is 1.54 times bigger

Financial – US is 5.66 times bigger

Healthcare – US is 10 times bigger

Services – US is 8 times bigger

Technology – US is 11 times bigger

Transportation – US is 8 times bigger

Utilities – US is 5.4 times bigger

Two standouts in Canada are basic materials which you can see above is quite a bit larger than the U.S. market. And banks, which in Canada did not experience the problems the US banks did during the subprime mortgage crisis. A case can be made that the Canadian banking sector offers diversification alongside holdings in U.S. banks. Canadian railway companies are also large and may offer unique opportunity different from U.S. transportation companies.

Stock Exchanges

In Canada, stocks with low market caps make up a large part of the securities industry.

The TSX Venture Exchange (TSX) is located in Calgary it is often called the junior listings market as it caters to early companies. Listing a company on the exchange is relatively.

The TSX Alpha Exchange (Alpha), is a market for trading securities listed on other Canadian exchanges.

The Canadian Securities Exchange (CSE), is an exchange designed for emerging issuers.

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