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“Domestic momentum” should help corporate earnings outpace the challenges of a soaring loonie, a new report from CIBC World Markets points out.

“We see profit levels north of the border benefiting from some critical offsetting factors,” says Peter Buchanan, senior economist with CIBC, in the latest TSX Earnings Watch. “Canadian consumers and businesses still look healthier, based on a range of indicators, including wealth and income growth and credit availability. Retail sales have also held up better north than south of the border. We expect all of that to translate into better top-line momentum, the lack of which stateside has helped spark fears about the sustainability of the corporate earnings recovery.”

In fact, Canadian companies with significant operations outside of Canada should be able to reap cost-benefits of purchasing services using a surging currency.

“Note that many of the TSX’s largest listed members have operations or sources outside Canada. Lower non-Canadian dollar-denominated costs for these firms could soften some of the direct blow from the costlier currency,” Buchanan says.

The currency will create difficulties for some sectors of corporate Canada.

“Exposed sectors include not only traditional mainstays, such as auto parts, but also industries like communications and electronic equipment and pharmaceuticals, which are highly levered to U.S. or overseas demand,” Buchanan says.

He adds that the sectors poised for the greatest year-on-year earnings growth this reporting season include health, gold, and info tech stocks.

According to the report, analysts expect earnings among TSX composite companies to fall 31% year-over-year this quarter, compared to -22% in the U.S.

“The upcoming Q3 earnings reports will provide a critical test of whether equity markets on both sides of the Canada-U.S. border can continue their winning ways,” Buchanan says. “Despite some pre-curtain jitters, the show stateside has opened well enough with over three quarters of early S&P 500 reporters beating expectations. No less significant given top-line concerns, 60% of those firms topped revenue estimates.”

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S&P launches equal weight indexes

Standard & Poor’s is launching the S&P/TSX Equal Weight Index Suite, which includes an S&P/TSX Equal Weight Global Base Metals CAD Hedged Index, the S&P/TSX Equal Weight Diversified Banks Index and the S&P/TSX Equal Weight Oil & Gas Index.

“Equal-weighted indices provide additional options to investors,” says Jasmit Bhandal, a director with Standard & Poor’s Canada. “Designed to meet investors need for benchmarking, investing and trading strategies that require a size-neutral index, the equal weight indices have weighting and rebalancing processes that lead to different return and risk profiles when compared with market capitalization weighted indices.”

The S&P/TSX Equal Weight Global Base Metals CAD Hedged Index is the equal-weighted and Canadian Dollar hedged version of the S&P/TSX Global Base Metals Index, a benchmark of securities involved in the production or extraction of base metals, and a subset of the S&P/TSX Global Mining Index.

The S&P/TSX Equal Weight Diversified Banks Index is the equal-weighted version of the S&P/TSX Diversified Banks Index.

The S&P/TSX Equal Weight Oil & Gas Index provides investors with a portfolio of securities involved in the oil and gas industry. Eligible securities are members of the S&P/TSX 60.

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Young Americans say they need millions to retire

While it may not a realistic goal, Americans between the ages of 18 and 29 believe they need to save millions of dollars to retire comfortably according to a new poll by the Northwestern Mutual Foundation’s financial literacy Web site, Themint.org.

Visitors to the site were asked how much money they would need to have saved in order to retire. More than four out of five respondents (about 85%) aged 18 to 29 said they would need at least $1 million, and almost half 45% said they would need at least $2 million.

In comparison, only 60% of adults aged 30 and up thought they would need to save $1 million, and only 27% thought they would need at least $2 million.

“While today’s adults think they’ll need one nest egg to retire, young people think they’ll need a baker’s dozen,” says Meridee Maynard, financial literacy expert and senior vice president with Northwestern Mutual. “In contrast to their older counterparts, young adults see a need to save more for retirement, which is wise given this generation is expected to live longer than any in history.”

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Manulife continues Chinese expansion

Manulife-Sinochem Life Insurance has received approval from the China Insurance Regulatory Commission (CIRC) to operate in the Chinese city of Shantou.

The new license will expand Manulife-Sinochem’s operational presence in China to 38 cities across 11 provinces. Shantou has a population of five million and is located in southeast Guangdong province.

” Shantou is another significant step in our efforts to expand Manulife-Sinochem’s reach to serve clients across China,” stated Manulife Financial’s president and CEO, Donald Guloien. “We are very pleased with the positive reception our products and services are receiving from our fast growing base of customers across China.”

With this latest approval, Manulife-Sinochem is licensed in cities that are home to more than 276 million individuals. This is the eighth license in the province of Guangdong. Manulife-Sinochem currently has about 11,500 professionally trained staff and agents serving over 450,000 customers across China.

Manulife-Sinochem is a joint venture company between Manulife (International) Ltd. (51%) and China Foreign Economic and Trade Trust & Investment Company, a member of the Sinochem group (49%).

(10/19/09)