Though bilateral trade between Canada and China is only in its early stages of growth, the Great White North is already benefitting from the Middle Kingdom’s appetites.

Data reported by the Customs General Administration show China has overtaken Germany as the world’s largest exporter. Skeptics will helpfully point out that this is a function of whose exports have fallen least amid the global demand destruction of the last couple years.

The numbers will be interpreted either as a sign that the global economy has turned the corner and is able to stand on its own two feet or as further evidence of government-inflated activity the substance of which will leave the world depressed in the long run. But the magnitude of the surprise suggests we’re closer than many perma-bears would have you believe to a real turn toward modest but sustainable growth.

China’s exports were up 17.7 percent year-over-year in December, while a 55.9 percent year-over-year increase pushed imports to a record. Demand from China’s two largest export markets, the US and the European Union, showed signs of returning to normal, as sales to the US rose 15.9 percent and to the EU 10.2 percent.

For the full year, China’s exports fell 16 percent and imports declined 11.2 percent. The trade surplus was USD196.1 billion, sliding for the first time since 2003.

In December, exports were USD130.7 billion and imports were USD112.3 billion. The customs bureau said the import value was unprecedented and exports were the fourth-largest on record. “The rebound in export growth is no surprise given the collapse in trade at the end of 2008,” Brian Jackson, an emerging-markets strategist at Royal Bank of Canada in Hong Kong, told Bloomberg News. “But this is still good news and reflects a real improvement in external demand.”

This could be among the first of what will be a series of eye-popping percentage-terms beats for many economic indicators and statistics–December 2008 was nothing short of catastrophic as far as the slowing of the global economy is concerned. The so-called base effect is huge for December 2008 and for the fourth quarter.

The import figure, particularly compelling, suggests that, in the long term, China is capable of becoming a domestic-demand-driven engine of global growth a lot sooner than many observers forecast.  That it surpassed the US in 2009 as the world’s largest new car market is further evidence. And all this has positive implications for Canada.

If the phrase “increase in shipments to China” becomes a regular part of global market reporting, countries like Australia will benefit directly because of its iron ore, for example. Canada, though an ocean away from the Middle Kingdom, is a lot like Australia. Critically, it, too, is blessed with abundant natural resources, including base metals and energy commodities.

China’s crude oil imports hit a record 21.26 million metric tons in December, equivalent to 5.03 million barrels a day, partly on a push by state-owned refiners to have enough fuel in reserve ahead of the Lunar New Year holiday next month. For all of last year, crude oil imports rose 14 percent to 203.79 million tons, likely cementing China’s place as the second-largest importer of crude oil after the US in 2009, ahead of Japan. Crude oil accounts for more than 50 percent of Canada’s exports.

China imported 62.16 million metric tons of iron ore in December, 80 percent more than a year earlier and the second-highest volume on record. Iron ore imports were up 22 percent month-over-month. For the full year of 2009, China imported 627.78 million tons, up 42 percent from 2008. The high import volume could be an indication that traders and steelmakers stockpiling the steelmaking ingredient before the annual re-setting of benchmark prices; the market right now is pricing in a 20 percent increase. Canada is the world’s third-largest iron ore producer, after Australia and Brazil.

For all of 2009, imports of copper and its products soared 63 percent, and purchases of aluminum and its products climbed 164 percent. Canada is the third-largest copper producer in the world.

StatisticsCanada reported this morning that Canada returned to a trade deficit in November after a surprise surplus in October; this is as much about the strength and resilience of the domestic economy as it is about the health of Canada’s trade partners.

November data show imports increased by 3.9 percent. Exports still expanded month-over-month, by 1.1 percent, driven largely by rising prices for oil, among other commodities. And economists still expect exports to add to growth in the fourth quarter for the first time since the first quarter of 2009.

We’ll have a clearer understanding of the impact of China’s December imports on Canada when StatsCan reports its December trade numbers next month.

Trans-Atlantic Loonie

According to a statement posted to the Canadian Finance Dept’s website, Canada raised approximately USD2.9 billion in Europe last week:

The 10-year bond issue raised €2 billion, equivalent to about US$2.9 billion at current exchange rates. The proceeds will be used exclusively to supplement and diversify funding for Canada’s foreign exchange reserves, rather than to finance public debt or spending.

The bond transaction achieved all of the Government’s objectives, including providing cost-effective and diversified funding for the foreign reserves held in the Exchange Fund Account. The investor base for the 10-year bond issue includes more than 200 investors from a wide range of central banks, other official institutions, commercial banks and foreign-based investment funds across a diverse geographical area.

Borrowing costs came in below offerings by other developed nations. Canada is paying six basis points lower than France paid on a similarly structured issue, four basis points below the rate on a Dutch bond.

As we discussed last week, the Canadian story is generating a lot of interest all over the world: There was enough demand to fill what was eventually sold five times over.

Act Now

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The Roundup

News flow specific to CE Portfolio and How They Rate companies is still relatively light as we gear back up after the holiday season, although long-term developments in the North American energy space continue to be bullish for high-yielding producer trusts and corporations. And signs of a durable though relatively modest recovery continue to build.

We’ll be looking as close as ever at fourth-quarter and full-year 2009 numbers for signs of strength, signs of weakness, and overall sustainability of payouts once numbers start to roll in February.

Conservative Holdings

Artis REIT (TSX: AX-U, OTC: ARESF), with partner Kingswood Capital Corp, has acquired 50 percent of the Kincaid Building and the Cliveden Building in Metro Vancouver, British Columbia. Artis also announced agreements to buy an industrial property in Saskatoon, Saskatchewan, a retail property in West Bank, British Columbia, and a flexible-use/industrial property in Edmonton, Alberta.

The total purchase price for the completed and announced deals is CAD72 million.

The REIT will sell 4.6 million units through an underwriting syndicate on a bought-deal basis at CAD11 per to raise gross proceeds of CAD50.6 million; full exercise of an over-allotment option will bring an additional CAD7.6 million. Artis REIT is a buy up to USD12.

• AltaGas Income Trust (TSX: ALA-U, OTC: ATGFF)–February 26
• Artis REIT (TSX: AX-U, OTC: ARESF)–February 12
• Atlantic Power Corp (TSX: ATP, OTC: ATLIF)–March 31
• Bell Aliant Regional Communications Income Fund (TSX: BA-U, OTC: BLIAF)–February 3 (confirmed)
• Bird Construction Income Fund (TSX: BDT-U, OTC: BIRDF)–February 12
• Brookfield Renewable Power Fund (TSX: BRC-U, OTC: BRPFF)–February 9 (confirmed)
• Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF)–February 26
• CML Healthcare Income Fund (TSX: CLC-U, OTC: CMHIF)–March 4
• Colabor Group (TSX: GCL, OTC: COLFF)–February 25
• Davis + Henderson Income Fund (TSX: DHF-U, OTC: DHIFF)–February 24
• IBI Income Fund (TSX: IBG-U, OTC: IBIBF)–February 12
• Innergex Power Income Fund (TSX: IEF-U, OTC: INRGF)–March 16
• Just Energy Income Fund (TSX: JE-U, OTC: JUSTF)–February 5
• Keyera Facilities Income Fund (TSX: KEY-U, OTC: KEYUF)–February 18 (confirmed)
• Macquarie Power & Infrastructure Income Fund (TSX: MPT-U, OTC: MCQPF)–February 19
• Northern Property REIT (TSX: NPR-U, OTC: NPRUF)–March 2
• Pembina Pipeline Income Fund (TSX: PIF-U, OTC: PMBIF)–March 3
• RioCan REIT (TSX: REI-U, OTC: RIOCF)–February 2
• TransForce (TSX: TFI, OTF: TFIFF)–February 25 (confirmed)
• Yellow Pages Income Fund (TSX: YLO-U, OTC: YLWPF)–February 12

Aggressive Holdings

Newalta (TSX: NAL, OTC: NWLTF) announced an agreement with BioteQ Environmental Technologies (TSX: BQE, OTC: BTQNF) to work jointly to identify and commercialize waste-treatment projects that recover, recycle, or treat industrial waste and manage related byproducts.

As part of the agreement, Newalta will buy approximately 3.6 million shares of BioteQ from the company’s treasury at CAD1.10 per, for proceeds of CAD4 million; each share includes a warrant to purchase one common share of BioteQ at 125 percent of the issue price for one year and 150 percent of the issue price thereafter. The warrants expire after five years.

This private placement will close on or about Jan. 31, 2010. Work on assessing viable projects will begin immediately. Newalta is a buy up to USD10.

• Ag Growth International (TSX: AG-U, OTC: AGGZF)–March 16
• ARC Energy Trust (TSX: AET-U, OTC: AETUF)–February 11
• Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)–February 19
• Daylight Resources Trust (TSX: DAY-U, OTC: DAYYF)–March 4
• Enerplus Resources Fund (TSX: ERF-U, NYSE: ERF)–February 26
• Newalta (TSX: NAL, OTC: NWLTF)–March 5
• Paramount Energy Trust (TSX: PMT-U, OTC: PMGYF)–March 10
• Penn West Energy Trust (TSX: PWT-U, NYSE: PWE)–February 18
• Peyto Energy Trust (TSX: PEY-U, OTC: PEYUF)–March 10 (confirmed)
• Provident Energy Trust (TSX: PVE-U, NYSE: PVX)–March 11
• Trinidad Drilling (TSX: TDG, OTC: TDGCF)–February 26
• Vermilion Energy Trust (TSX: VET-U, OTC: VETMF)–February 12

Oil and Gas

Bellatrix Exploration (TSX: BXE, OTC: BLLXF) is raising CAD40 million via a bought-deal offering of 12.1 million shares at CAD3.30 per. Underwriters, co-led by National Bank Financial and Wellington West Capital Markets, have an option to buy an additional 1.5 million shares to cover any overallotment; full exercise would bring an additional CAD5 million in gross proceeds.

Bellatrix will use net proceeds from the offering to fund an expanded capital program for 2010 and for general corporate purposes. Bellatrix Exploration is a hold.

Electric Power

TransAlta Corp (TSX: TA, NYSE: TAC) has been awarded a 25-year power purchase agreement (PPA) to provide an additional 54 megawatts (MW) of wind power to New Brunswick Power Distribution and Customer Service Corp. TransAlta will expand its existing 96 MW Kent Hills wind facility, which began commercial operations in December 2008.

Terms of the PPA are confidential, though the capital cost of the project is estimated to be USD100 million. The project is expected to begin commercial operations by the end of 2010. TransAlta Corp is a buy up to USD22.

Energy Services

Peak Energy Services Trust (TSX: PES-U, OTC: PKGFF) cancelled a previously announced CAD22 million, 12 percent convertible secured subordinated debenture offering because management now foresees significantly weaker 2010 results than previously forecast. The rights offering did not provide the trust an “appropriate solution to accomplish its long-term objectives,” according to management.

Management also announced that its senior lenders have waived all existing defaults and events of default until Jan. 29, 2010 and that Deans Knight Capital Management has agreed to extend the maturity date for the repayment of a CAD3 million bridge loan to March 31, 2010. Peak said based on its current cash flow projections and access to the bridge loan that it will have sufficient cash to continue as a going concern up to March 31. Peak Energy Services Trust is a hold.

Financial Services

CI Financial (TSX: CIX, OTC: CIFAF) reported net sales of CAD1.5 billion and growth in assets under management of CAD12.1 billion or 22.1 percent for 2009. The fund company posted gross retail sales of CAD8.5 billion for the year, with net sales consisting of CAD1.6 billion in net sales of long-term funds and CAD71 million in net redemptions of money market funds. CI recorded positive net sales in 11 of 12 months in 2009.

In December CI registered gross sales of CAD808 million and net sales of CAD100 million, consisting of net sales of CAD81 million in long-term funds and CAD19 million in money market funds.

As of Dec. 31, 2009, CI had total fee-earning assets of CAD88.8 billion, a year-over-year increase of CAD14.7 billion, or 19.8 percent. Assets under management consisted of investment funds of CAD62.7 billion, up 23.4 percent in 2009, and institutional managed assets of CAD4 billion. CI also had assets under administration at Assante Wealth Management Ltd of CAD21.4 billion and other fee-earning assets of CAD741 million. CI Financial is a hold.