Tickers in this Article: EWM, EWC, BMO, TCK, CNDA, TGB, GDX, SIL, RY, FXC
When investors look for exciting investment destinations, countries like Malaysia, Peru and China often top their lists. Funds like the iShares MSCI Malaysia Index (NYSE:EWM) have surged as investors have looked towards the exotic to find gains. Still, as these emerging nations continue to grow, their demand for natural resources remains insatiable. Our often ignored neighbor to the North with its vast supply of natural resources, may make it just as an exciting proposition as Estonia.

IN PICTURES: 10 Reasons To Add ETFs To Your Portfolio

Canadian Gains
Boasting the world's second largest oil reserves behind Saudi Arabia, Canada could be investors' developed ticket into emerging markets. The nation could almost be viewed as a commodities hyper-market, providing all the necessary ingredients that fast-growing countries in Asia and South America need to build infrastructure and support increased consumerism. Major exports including oil, grains, industrial and precious metals are all set to increase. Analysts forecast a nearly 57% increase in Canadian exports to Asian-Pacific nations this year.

While Canada is known for its energy and minerals resources including the rich oil sands of Alberta, the nation is also an agricultural superstar. The country is one of the world's largest producers and exporters of wheat, canola and fertilizer. As the planet continues to grip with food crunches and shortages, these agricultural exports will ultimately help boost Canada's bottom line.

Finally, the financial position in Canada is good. According to the Organization for Economic Cooperation and Development, even after stimulus spending in 2009 and 2010, Canada's net debt to GDP ratio of about 30% compares favorably against the G7 average ratio of about 70%. While this number is expected to increase, analysts predict that it will still be lower than most industrial nations. Additionally, Canadian banks consistently rank among the world's most sound and didn't make the same sort of risky subprime real estate loans that their U.S. sisters did. Canadian home prices have held up relatively well compared to the U.S.

A Canuck Portfolio
With the International Monetary Fund anticipating Canada's GDP to expand by nearly 3% and further boosts Canadian to exports in 2011, investors may want to consider adding the nation to a developed market portfolio. The iShares MSCI Canada Index (NYSE:EWC) has proved to be the most popular way of gaining access to the nation. The fund tracks 102 different Canadian companies like the Bank of Montreal (NYSE:BMO) and Teck Resources (NYSE:TCK), and yields 1.4%. Still, there are other ways to take advantage of the growth in Canada and the nation's proximity to the United States offers many individual stock choices for portfolios.

With 74% of its AUM in materials and energy companies the IQ Canada Small Cap ETF (Nasdaq:CNDA) may be a better choice as an emerging market play. The fund's holdings, like copper miner Taseko Mines (NYSE:TGB), will benefit as developing nations build out their infrastructure. Similarly, both the popular Market Vectors Gold Miners ETF (NYSE:GDX) and Global X Silver Miners ETF (NYSE:SIL) allocate nearly 60% to Canadian materials companies.

For those investors looking to capitalize on the strength of Canada's banking sector, The Royal Bank of Canada (NYSE:RY) has one of the highest Tier One capital ratios in the banking world. The bank has been quietly adding to this ratio during the past few years. Analysts estimate that the bank will have an estimated $17 billion in excess capital by 2012. Shares of RBC yield 3.4%.

Bottom Line
While not exotic, Canada may be one of the best was to play the growth in emerging markets. Its rich natural resources and sound financial system make it an ideal investment destination. The previously mentioned funds or the CurrencyShares Canadian Dollar Trust (NYSE:FXC) are perfect ways to add the country to a developed market portfolio. (For more, check out Canada's Commodity Currency: Oil And The Lonnie.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

comments powered by Disqus

Trading Center