Canada’s Exposure Limited

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    Recent weakness in emerging markets may shake investor confidence, but the direct exposure for the Canadian economy is likely to be relatively limited, says BofA Merrill Lynch ‘Global Research.’ It says economic and financial uncertainty in emerging markets (EMs) has raised concerns about the prospects for global growth and possible spillover effects on economies such as Canada. Ultimately, it concludes that while turmoil in EMs could hurt investor confidence, “the direct economic impacts on Canada should be limited.” Reasons for this, it says, include the fact that despite efforts to diversify, Canada’s direct trade with emerging market only represents about 10 per cent of total exports. And, the share is even lower for markets that have seen the steepest slides in their currencies. However, the resource sector could be hit, “given the correlation between emerging market growth and Canada’s commodity prices.”