News Pick – Canadian Tech Stocks Rally, Not Why You Might Think

canadian_tech_rally

March 10, 2015 There was an interesting article by John Shmuel in the Financial Post last week, and he was arguing that the massive Nasdaq rally was overshadowing something of a bigger story, the rally by tech stocks in Canada. What’s interesting here is that much of growth is due to a peculiarity of Canadian businesses, where most of their income comes from abroad (usually the US), and most of their expenses are local.

 

“If you look at the Canadian technology companies, they’re not really that Canadian in a sense — the vast majority of their sales are outside of our country,” said Craig Basinger, chief investment officer at Richardson GMP

As the Canadian dollar has been on something of a relative decline versus its American counterpart, earnings are coming back much larger after trade. This, in essence, quantifies the relationship between the Canadian resource market and Canadian tech stocks, as lower Oil and other commodity prices are causing a relative weakening of the Canadian dollar, which in turn are causing the growing margins on exchange for Canadian tech businesses.

 

You can find John’s article here.