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Heavy Oil Exposure Weighs on Canada ETFs


Canada country-specific exchange traded funds continue to fall off, with the Canadian equities market dipping to an eight month low, as lower oil prices push down energy stocks for the 10th consecutive day.

Over the past three months, the iShares MSCI Canada ETF (EWC) has dropped 10.1% and First Trust Canada AlphaDEX Fund (FCAN) fell 13.3%.

EWC includes a 23.7% position in energy stocks while FCAN allocates a hefty 39.7%. In comparison, the S&P 500 only includes a 9.2% weight toward energy players.

“Canada is a major commodity exporter,” according to Morningstar analyst John Gabriel. “Its confirmed oil reserves, including oil sands, are second only to those of Saudi Arabia, and it’s a major producer of minerals, natural gas, and agricultural commodities.”

Looking at the Standard & Poor’s/TSX Composite Index, Canadian energy stocks lost 2% as a group on Tuesday, the largest loss among 10 industries, reports Eric Lam for Bloomberg. The S&P/TSX Energy Index accounts for about a quarter of the broader index.

“Part of the selloff is energy related, but then you have the other challenge that the areas of the TSX not related to commodities were perhaps overvalued,” Philip Petursson, director of institutional equities at Manulife Asset Management Ltd., said in the article. “You’ve got a valuation adjustment going on at the same time as energy prices are dropping substantially.”

West Texas Intermediate crude oil futures fell to $83.6 per barrel Tuesday while Brent crude oil hit $86.6 per barrel.

Commodity producers, including oil, copper and gold, have led the Canadian markets lower in the first half of the year due to overseas economic concerns, notably in Europe and China. Additionally, oil prices are falling in response to a U.S. shale boom and steady supply from the Organization of Petroleum Exporting Countries. [Oil ETFs To Remain Depressed As Saudis Target Lower Prices]

iShares MSCI Canada ETF


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