While the Canadian economy has been knocked around this year, largely due to the falling crude oil prices, investors should not count out Canada country-specific exchange traded funds.
Canadian equities are heavily skewed toward the energy sector, which has weighted on the overall market. For instance, the iShares MSCI Canada ETF (NYSEArca: EWC), which includes a 21.6% tilt toward energy companies, has dipped 1.4% year-to-date. EWC is currently trading below its 200-day simple moving average but has found support on its short-term, 50-day average.
Additionally, the First Trust Canada AlphaDEX Fund (NYSEArca: FCAN), which employs growth and value screens to select holdings, was down 0.8% so far this year while the SPDR MSCI Canada Quality Mix ETF (NYSEArca: QCAN), which includes value, quality and low volatility screens, fell 2.3%.
The Bank of Canada has been a reliable arm in guiding the Canadian economy, writes Luke Kawa for Bloomberg. For instance, the central bank was among the first to adopt a formal inflation target and has enjoyed success in achieving its targets. [Canada ETF Back on Track with Economy Recovering]
The country also enjoys large natural resource reserves. As we have witness, Canada’s oil production could either lift or weigh on the economy, depending on the energy market. Additionally, as we hear more about droughts and dry weather conditions, Canada’s freshwater reserves, which account for 20% of the world’s freshwater, could come into play.
Financial names make up some of the top holdings in the Canada ETF portfolios. For instance, the sector makes up 38.0% of EWC and 33.8% of QCAN. FCAN holds a smaller 13.0% tilt toward financials and overweights 28.7% energy.