Two days, two new data points that separate Canada from its developed-world peers. It’s plain that the world is undergoing a significant adjustment in economic growth leadership, a change that will leave the US, the world’s foremost military power, atop the chain but will see emerging economies displace traditional powers among the global elite.

Recent developments suggest that emerging Asian powerhouses China and India are leading the region’s ascendance, a process that will see Europe’s relative importance diminished. But Canada is different than the rest of the G-7, though, in one tangible respect that ensures its prosperity in the coming decade and well beyond: Its lands contain what’s considered the second-largest recoverable oil reserves on Earth.

This factor gives it emerging-market qualities. Combined with stable political and financial systems and a tax structure that will soon be among the most hospitable to business and you have what has to be among the best places to invest in the world. The trend of conversions by high-yielding income trusts into high-yielding corporations separate it from all others.  

The big picture indeed displays Canada in a very fine light. Announcements from the government’s official data agency and the country’s central bank once again demonstrate that Canada was in better condition when an otherwise ordinary downturn morphed into a hideous, jobs-and-balance-sheets-killing Great Recession when Lehman Brothers’ implosion set in motion a global credit freeze.  

On Monday morning Statistics Canada reported that real gross domestic product (GDP) expanded at an annualized rate of 6.1 percent in the first quarter. Canada grew at a rate of 4.9 percent in the fourth quarter. The US economy expanded at an annualized pace of 3 percent in the first quarter.

Canada grew faster in the first quarter of 2010 than in any other 12-week period since 1999, a sure reflection of the Great White North’s growing ties to emerging economies in Asia. As StatsCan noted in an April report, Canada’s short, shallow recession was caused not by disruption of the production and employment cycle but by falling commodity prices.

Growth for the 12 weeks ended March 31 was stronger than the 5.8 percent both the Bank of Canada (BoC) and Bay Street analysts had forecast. During the first quarter of 2009 Canada contracted by 7 percent. But once global efforts as monetary and fiscal stimulation took hold demand for oil, in particular, resumed its upward trajectory, and Canada bounced back.

A commodity-price correction is far easier to recover from than the type of cyclical downturn that leads to mass layoffs of the sort that erode final consumer demand. Details in StatsCan’s GDP report support the case: The decade-best quarter was driven by continued growth in consumer spending and manufacturing, good news in the face of concern about the impact this sector of a strong currency.

Production grew faster in the first quarter of 2010 than in the fourth quarter of 2009, and inventory levels rose after being drawn down in all four quarters of 2009. Residential investment increased for a fourth consecutive quarter, as did consumer spending on goods and services. Export and import volumes both rose for a third consecutive quarter, with growth in imports outpacing growth in exports in the first quarter.

Notably, growth in government current expenditure on goods and services slowed to 0.5 percent, following increases of 1.6 percent in the third quarter of 2009 and 1.7 percent in the fourth. After five quarters in which growth averaged over 4 percent, government capital expenditure advanced 1.1 percent in the first quarter.

Consumer price levels, job creation and housing sales are all rising in Canada, pointing to a solid recovery. The US is closer to, at least, disinflation than rising inflation. Consumer demand is still weak; in April consumer spending barely rose after six consecutive monthly gains. And unemployment remains stubbornly high. The Federal Reserve is unlikely to begin its rate-hiking cycle until 2011.

On Tuesday morning, following through on a move it telegraphed in its last policy statement, the BoC boosted its benchmark interest rate from its effective lower bound, 0.25 percent, to 0.5 percent, making it the first among the G-7’s central banks to increase the cost of borrowing since a series of cuts designed to combat the impact of the global recession and financial crisis took rates to record lows in most of the world’s major developed economies.

In a statement accompanying its decision the BoC included language that suggests this could be a one-off move, and expressly noted that at 50 basis points the overnight lending rate establishes plenty of room for monetary stimulus.

Long-term factors such as the soundness of its financial system and its abundant and in-demand natural resources support a strong Canadian dollar. The loonie is likely to resume a flight toward parity with the US dollar (and beyond) that had been interrupted by short-term worries about the sustainability of the global recovery.

The loonie swoons on growth concerns, soars when investors pay attention to the quality of its supports, namely a sound financial system and a tremendous store of natural resources. This makes Canada the ideal play when fear grabs hold of everyone else and causes the irrational cascade. Scoop them up and set them in your portfolio when they get cheap.  

If you’ve made the move to Canadian income trusts, you understand well the comfort that comes with a reliable distribution stream. And you certainly appreciate the market-beating bounce-back trusts as a group made during the post-March 2009 rally. There’s no rational reason on Earth why this collection of high-yielders won’t be able to pump out consistent dividend streams once the calendar turns to Jan. 1, 2011.

A large number will be able to protect cash flow from Revenue Canada–the Great White North’s equivalent of the Internal Revenue Service–for several years into the next decade because of significant tax pools built up through capital investment.

Setting aside the hostility shown by the Oct. 31, 2006, announcement of the “Tax Fairness Plan,” Canada is among the–if not the–most friendly environments for investors in the world.

The Roundup

An energy producer and longtime Aggressive Holding demonstrates again that Canadian oil and gas companies can access capital markets on favorable terms–despite fears of rising debt costs spurred by the sovereign crisis still unfolding in Europe.

A relatively new lynchpin of the Conservative Holdings adds to its already impressive backlog of construction projects–future projects that include public as well as private clients across Canada and will support its post-conversion, no-cut ambitions.

These items as well as news from the How They Rate universe follow. Note that we’re in the final weeks of the second quarter–we’ll begin providing earnings announcements dates in next week’s issue. And we’ll also have the details on the second quarter (ended April 30) for one of the pillars of Canada’s relative global strength, the Big Five banks.  

Aggressive Holdings

ARC Energy Trust (TSX: AET-U, OTC: AETUF) placed USD150 million of senior unsecured notes with an average duration of 10 years at 5.36 percent. ARC is paying a 165 basis point spread above comparable US Treasuries to a group of US institutional investors.

The move is a major step as ARC seeks access to credit markets beyond Canada. That the deal was completed on such favorable terms is further indication that ARC’s long-term prospects, be it trust or corporation, are solid. ARC Energy trust is a buy up to USD22.

Conservative Holdings

Bird Construction Income Fund (TSX: BDT-U, OTC: BIRDF) has inked a CAD118 million deal with Defense Construction Canada for the design and construction of the Pleasantville Consolidation Project in St. John’s, Newfoundland.

The project will include hazardous materials abatement and building demolitions, site remediation and construction of a new facility. Construction will commence immediately and is expected to be completed by the fall of 2013. Bird Construction Income Fund, which continues to add to its considerable project backlog, is a buy up to USD33.

Oil and Gas

Enterra Energy Trust (TSX: ENT-U, NYSE: ENT) is now trading as Equal Energy (NYSE: EQU) on the New York Stock Exchange following ratification by unitholders of the trust’s corporate conversion plan. Equal Energy’s symbol on the Toronto Stock Exchange will also be EQU; the new symbol will become effective in two or three trading days. The company will trade under the current symbol (officially ENT.UN on the TSX), which will represent an entitlement to shares of Equal Energy.

The newly named company will continue to work the natural gas liquids-rich Hunton play in Oklahoma as well as horizontal oil drilling projects in the Cardium, Circus Viola and Viking plays. Enterra Energy Trust is a hold.

NAL Oil & Gas Trust (TSX: NAE-U, OTC: NOIGF) raised its 2010 production forecast after acquiring undeveloped land near its new light-oil discovery at Hoffer in southeast Saskatchewan.

Management expects 2010 production of 31,000 to 32,000 barrels of oil equivalent per day (boe/d); the company still expects to spend CAD210 million on development projects. NAL Oil & Gas Trust is a buy up to USD15.

Zargon Energy Trust (TSX: ZAR-U, OTC: ZARFF) closed a previously announced acquisition of working interests in several southern Alberta medium- and heavy-oil pools with approximately 350 boe/d of existing production, along with approximately 6.9 thousand net acres of undeveloped land for CAD25 million in cash.

Most of the pools are adjacent to or near Zargon’s Little Bow property. Zargon Energy Trust is a buy up to USD20.

Electric Power

Emera (TSX: EMA, NYSE: EMA) is raising CAD150 million via the issue of five-year, resetting preferred shares on a bough-deal basis at CAD25 per. Holders will receive fixed cumulative dividends at an annual rate of CAD1.10 per share, a yield of 4.4 percent, for the initial five-year period ending on Aug. 15, 2015. The rate will reset on August 15, 2015, and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield plus 1.84 percent. 

Underwriters have the option of buying, at any time up to 48 hours before closing, an additional 2 million shares at CAD25 per. Net proceeds will be used for general corporate purposes. Emera is a buy up to USD24.

Business Trusts

Cineplex Galaxy Income Fund (TSX: CGX-U, OTC: CPXGF) is adding another high-premium attraction to its screen lineup this summer: Canada’s largest movie-theater operator will broadcast live and in high definition at 65 of its facilities the Sonisphere Festival, featuring Metallica, Slayer, Megadeth and Anthrax, from Sofia, Bulgaria, on June 22.

Cineplex will charge CAD18 for admission through its website. Cineplex Galaxy Income Fund is a buy up to USD18.

Real Estate Trusts

Primaris Retail REIT (TSX: PMZ-U, OTC: PMZFF) completed the issuance on a bought-deal basis of 4.925 million units at CAD17.30 per for gross proceeds of CAD85.2 million. Management will use the net proceeds of pay down existing debt, fund acquisitions, improve existing properties and for general purposes.

Underwriters can exercise over-allotment options to acquire additional units for 30 days after closing. Primaris Retail REIT is a hold.

Natural Resources

Potash Corp of Saskatchewan’s (TSX: POT, NYSE: POT) sales unit, which it co-owns along with The Mosaic Company (NYSE: MOS) and Agrium (TSX: AGU, NYSE: AGU), negotiated the sale of 70,000 tonnes of potash to China’s Sinofert for a maximum total price of USD26 million.

The per-tonne price of USD370 is consistent with what Indian buyers negotiated in February. Earlier in February, however, Sinofert paid USD350 per tonne; the higher price on the new contract suggests momentum for potash prices going forward. Farmers are indeed more active this season, as loosening credit and firming grain prices have made for a markedly improved planting environment. Potash Corp of Saskatchewan is a buy up to USD110.

Energy Services

Precision Drilling Trust (TSX: PDS-U, NYSE: PDS) has completed its one-for-one, shares-for-units conversion into Precision Drilling Corp (TSX: PD, NYSE: PDS)

Precisions common shares will begin trading on the Toronto Stock Exchange under the new symbol “PD” around June 4; the New York Stock Exchange listing, “PDS,” will be effective as of June 2. Trust units will de-list once the common shares debut on each exchange. Wait until Precision Drilling Corp trades below USD6 to buy it.

Transports

Jazz Air Income Fund’s (TSX: JAZ-U, OTC: JAARF) pilots have voted to strike should it become necessary in its negotiations with Jazz Air management. The pilots have been operating under a contract executed in 2004; the agreement expired at the end of the second quarter of 2009.

Under the Canada Labour Code, both the strike authorization vote and written notification to the company are required before any walkout can begin. Following a mandatory cooling-off period that expires in mid-June Jazz pilots will legally be allowed to go on strike if a new collective bargaining agreement isn’t reached. Jazz Air Income Fund is a hold.