Équipe PolyFinances

Monthly Review - March 2021

Financial Services
Canadian banks support Canadians, by Jana Hatem

Canadian banks have seen better than expected results in the first quarter of 2021 despite the pandemic (Balakrishnan, 2021). Banks are more motivated than ever to support their customers. Indeed, to mitigate the financial impact of the pandemic, the banking sector, in collaboration with the government, has been able to help more than 800,000 homeowners obtain mortgage flexibility and have offered more than 482,500 individuals credit card deferrals. As a result of numerous initiatives, the Canadian banking industry has facilitated interest-free loans to more than 850,000 small businesses through the Canada Business Emergency Account and Canada’s six largest banks have waived more than $109 million in fees for personal and small business accounts. In addition, $22 million in donations have been made to the Canadian community. Canadian banks will continue to support their personal and small business customers, employees and communities by providing solutions that promote strong economic and social recovery (Canadian Bankers Association, 2021).

 

Basic Materials

Evolution of the Basic Materials Sector, by Laurinda Tchouanga

Figure 1 compares the performance of the S&P/TSX Composite Index (^GSPTSE), shown in green, and the S&P/TSX Capped Materials Index (^GSPTTMT), shown in purple. It can be seen that during the month of March, the Basic Materials sector moved relatively in line with the market index. However, it ended the month with a return of 5.25% less than the market. (return ^GSPTSE: 2.62% vs return ^GSPTTMT: -2.63%)

Figure 1: Comparaison entre la performance du S&P/TSX et la performance de l’indice plafonné des matériaux S&P/TSX 

Industries

One year later, how is Air Canada doing?, by Marc-Alain Tétreault

The pandemic hit Air Canada hard in the second quarter of 2020, causing its operating revenues to drop from $4.74 billion to $527 million. The company was able to reduce its operating costs in the third quarter by retiring 79 of its aircraft, which opened the door for the layoff of many of its employees.  Also, they increased their revenue by increasing their presence in the air freight market. These measures reduced their operating costs to $1.54 billion and increased their revenues to $757 million. The effects of the pandemic on the company are reflected in the stock price, as can be seen in the following chart.

Fig. 2 : Air Canada’s three-year stock performance

However, it should be noted that Air Canada’s stock has risen 66% in the past year. The increase in the stock suggests that investors are confident that the company has enough liquidity to get through the crisis. Also, the possibility of the acquisition of Air Transat and the discussion of government assistance for the airline industry have also contributed to the rise in the stock. In short, Air Canada’s stock is still very interesting, but investors will have to be patient, as we are still far from a return to normalcy.

 

Consumer Services

Evolution of the Consumer Staples Sector, by Alexandre Lanctôt Laurin

As can be seen in the following figure, the Canadian consumer staples sector outperformed the S&P500 as a whole by more than double in the month of March 2021. Recall that in February, the Consumer Staples sector underperformed the S&P500, returning 0.4% compared to 4.4%.  

 

Fig. 3 : Consumer Staples ETF returns vs. S&P500 

 

Then, it is interesting to compare the consumer staples stocks that make up the PolyFinances portfolio, i.e. Metro (MRU) and Alimentation Couche-Tard (ATD.B), with the ETF of the sector. We note that Metro grew fairly steadily during the month of March, while Alimentation Couche-Tard grew strongly at the beginning of the month, fell, and then rose again recently. For the month as a whole, the two stocks that make up the portfolio underperformed its ETF.  

 

Energy

Renewable energy: Africa in the picture, by Jean-Michel Dotonou

The Covid-19 has greatly impacted the financial health of many countries and particularly that of some developing countries located on the old continent. However, some interesting financial initiatives are emerging despite this period of health crisis that paralyzes many economies. Among them is an important agreement in the energy sector between Arise infrastructure and Aera group which aims to develop the renewable energy sector in Africa. 

Arise infrastructure services is a pan-African infrastructure developer and operator. It is one of the leaders in the trading of environmental products in Africa. On March 2nd, they announced that they have acquired Aéra group by taking 35% of the company’s shares for a value of 28.5 million euros. This colossal investment aims to achieve the objective of neutralizing the carbon emitted in its various projects. 

The nature of the group’s projects is to design, build and finance large-scale infrastructure that meets the critical needs of certain developing countries. They have completed several energy projects in Gabon and Togo and also have a strong presence in West Africa. 

(Finance, 2021)The company has also announced an expansion of its trading lines to cover new products: renewable energy production, biodiversity protection and water management certificates. It will be interesting to see how this acquisition will impact the group’s performance in the coming months through the evolution of its various projects. 

 

Information Technology

Technology Sector Underperforms S&P 500, by Richard Zhou

Below is the performance of the XLK ETF representing the technology sector for the month of March 2021 (in red) compared to the S&P 500 (in blue). We can see that it was a rather volatile month for the technology sector and more challenging with an average return of 5% below the S&P 500. 

 

Figure 1 : Performance of XLK vs S&P 500 

 

Among the major events of the month were Shopify which experienced a 30% loss during the month of March, Facebook and Google planning to set up undersea cables between North America and South Asia and Intel which launched its 11th generation of processors and shared its interest in manufacturing graphics cards. 

 

References

Balakrishnan, A. (2021, Février 25). Canadian banks report better-than-expected profits amid COVID-19 pandemic. Retrieved from Global News: https://globalnews.ca/news/7663464/coronavirus-canadian-banks-earnings-2021/ 

Canadian Bankers Association. (2021, Mars 24). Canada’s Banks are Standing by Canadians. Retrieved from Canadian Bankers Association: https://cba.ca/canadian-banks-are-standing-by-canadians 

Finance. (2021, 03 02). Agencecofin. Retrieved from Agencecofin: https://www.agenceecofin.com/gestion-publique/0203-85718-arise-is-devient-actionnaire-d-aera-group 

Journal de Montréal (2020, Mai 12), Le fédéral vole à la rescousse d’Air Canada. Récupéré sur: https://www.journaldemontreal.com/2020/05/12/le-federal-vole-a-la-rescousse-dair-canada

BNN Bloomberg (2020, Mai 4), Air Canada says virus impact to linger major cuts to come. Récupéré sur : https://www.bnnbloomberg.ca/air-canada-says-virus-impact-to-linger-major-cuts-to-come-1.1430989<