The Canadian economy is not immune from the U.S. credit crisis, but Canadian businesses are poised to emerge from this rough patch stronger than before, said a panel of business leaders on Monday.
Nevertheless, the panel, which spoke at a conference in Toronto focused on the U.S. credit crisis and its global impacts, warned that things could get ugly in the near term.
“Things are going to get a lot worse,” said Mark Wiseman, senior vice president of private investments at the Canada Pension Plan Investment Board. “You can’t deny the interdependence of our economy with the U.S. economy.”
But Wiseman pointed to factors that set the Canadian economy apart from the U.S., including a stronger fiscal environment that gives the Canadian government more flexibility to spend than the U.S. government.
Canadian banks are also in much better shape than their U.S. counterparts, Wiseman said, adding that the crisis presents them with an opportunity to gain share.
“At end of day, because of the way that we’ve managed our private affairs and public affairs, it means were in a position to come out of this a lot better than our friends to the south,” he said.
But given the fragile environment in the meantime, businesses can take steps to ensure that future exposure to market troubles is limited. Citi Canada, for instance, has been focused on liquidity, improving risk-management practices and strengthening its balance sheet, among other safety precautions.
“We need a plan that mitigates today’s issues and sets a course for tomorrow,” said Betty DeVita, country officer for Citi Canada. She added that it’s important to focus on the long run and avoid being “paralyzed by the fact that there’s a crisis.”
In exploring new prospects during difficult times, businesses are likely to find plenty of cheap investment opportunities. The CPPIB is one institution actively taking advantage of discount prices, Wiseman said.
But businesses must be careful in such a volatile environment, said Don Wilkinson, a partner and chairman of Deloitte & Touche LLP’s Canadian asset-management practice.
“There were players that moved in fairly quickly thinking there were opportunities, just to watch that capital disappear,” Wilkinson said. “There’s a lot of risk on those buying opportunities.”
Rather than rushing to snap up cheap stocks, investors would be wise to wait a bit and watch the trends, said Thomas Caldwell, chairman of Caldwell Financial Ltd.: “You want to get it after it’s bounced.”
The panel members agreed that regulatory changes are likely to result from the current crisis; and, in particular, more regulation is on the way.
“Regulations always deal with the last crisis,” said Caldwell. “My fear is that there will be knee-jerk regulations coming out of this thing as well.”
Rather than piling on more regulation, he said regulators should implement simpler rules that focus on the big picture. Nonetheless, the panel iterated that businesses could expect compliance costs to increase moving forward.
Canadian businesses to emerge in better shape after financial crisis
But panel of financial services industry experts says things could get ugly in the short term
- By: Megan Harman
- September 30, 2008 September 30, 2008
- 09:54