The ongoing NAFTA re-negotiations have understandably occupied Canadian minds as of late. However, from a geopolitical perspective these negotiations pale in comparison to the trade war that is emerging between the United States and China. The U.S. has also staked strong positions against the European Union, ostensibly an “ally” against China.
By the end of September, China and the United States are poised to have imposed tariffs on manufactured goods and commodities worth more than $350 billion combined. Analysts and economists are increasingly anxious that this escalating dispute could disrupt international trade and significantly curtail global growth.
Investors may want to seek shelter during this dispute and look to other emerging markets. Today, we are going to look at two stocks that present that option. Let’s dive in.
Bank of Nova Scotia (TSX:BNS)(NYSE:BNS)
Scotiabank stock has dropped 2.5% week over week as of close on September 5. Shares are now down 7.6% in 2018 so far. It has put together the weakest 2018 out of the Big Six Canadian banks. This is worrisome considering the fantastic results posted in the first three quarters for Canada’s major financial institutions. However, Scotiabank could represent an enticing buy-low opportunity.
Scotiabank released its third-quarter results on August 28. Adjusted net income rose to $2.259 billion compared to $2.117 billion in the prior year. Diluted earnings per share also climbed to $1.76 over $1.68 in Q3 2017. Scotiabank incurred acquisition-related costs of $320 million after tax in the quarter. Net income was powered by solid growth in its Canadian and International Banking segments.
The International Banking segment saw adjusted net income increase 15% year over year to $715 million. This was propelled by strong loan and deposit growth in Latin America as well as higher non-interest income and a lower effective tax rate. Scotiabank boasts the largest Latin American footprint of any of the top Canadian banks.
Scotiabank also boosted its quarterly dividend by $0.03 to $0.85 per share. This represents an attractive 4.5% dividend yield.
Fairfax India Holdings (TSX:FIH.U)
Fairfax India Holdings stock has climbed 3.3% in 2018 so far. However, shares have dropped 11% over the past three months. The company released its second-quarter results on August 2.
The company reported a net loss of $69.6 million in the second-quarter compared to net earnings of $268.6 million in Q2 2017. Earnings took a hit from a net change in unrealized losses on investment of $39.5 million, which was principally from a decline in the market price of the company’s investment in the public company IIFL.
Broadly, the Indian economy performed extremely well in a recent Q1 GDP report. The economy grew at an 8.2% clip in the April-June quarter in 2018. This growth occurred in spite of weakness in the rupee — also the result of global trade anxiety and the ongoing recovery from demonetization and the goods and services tax (GST). India has set an impressive pace and is well on track to meet its 7.4% annual growth target this year. Fairfax India Holdings may be a discount heading into the fall.
