January - Early Edition - CI Investments

Signature Market RoundupNatural resourcesForeign ExchangeScott ValiVice-President,Portfolio Managementand Portfolio ManagerEnergy and materials markets rallied into year-end on theback of favourable economic growth indicators and disruptivesupply dynamics. Australia was hit with severe flooding inkey thermal and coking coal producing regions, disruptingsupply and causing major producers to declare force majeure.These disruptions have once again reminded the world thatsupply is very tight with multiple infrastructure bottlenecks.Supply from this region is likely to be constrained at leastuntil the end of January.Copper prices also increased as continued strong demandand incremental supply disruptions focused attention onthe expected supply deficits in 2011. With limited newproduction and declining head grades at current operations,the copper market should continue to be strong this year.Oil markets also appear to be tightening. With confidencein global growth returning and increasing North Americandemand, the markets are anticipating a reduction in sparecapacity. The increase in oil prices is leading to a renewalof exploration and exploitation, boosting demand forenergy services.Grain markets are also tight, with disappointing harvestsin North America and the ongoing drought in Argentina.However, farm income should continue to be strong, leadingto robust fertilizer applications and the restocking of depletedwholesale and retail channels.James DutkiewiczVice-President,Portfolio Managementand Portfolio ManagerAs expected, the Canadian dollar has traded at and slightlyabove parity versus the U.S. dollar. Canada has overcomea trade deficit that is running at an annualized rate of$25 billion in the past four months, which is in sharpcontrast to the $40 billion to $50 billion in annualizedsurpluses in 2007-2008. Net foreign demand for Canadiansecurities, mostly debt products, has jumped to over$11 billion monthly in the past quarter. This demand, whichis easily funding the current account deficit, and highercommodity prices have contributed to the loonie being oneof the strongest currencies in the G10 in the past few months.The predominant story in foreign exchange marketsrecently has been the resurgence of the U.S. dollar versusthe euro. We increased our hedge against the euro in earlyNovember as a precaution to a “buy the rumour, sell the fact”market reaction to the quantitative easing announcementin the U.S. Indeed, the euro has retraced much of its rallyfrom the summer, as Ireland sought financial assistance fromthe European Union and IMF. The outlook for the eurois problematic in the near term, due to an imposing debtrefinancing schedule for the peripheral nations. That said,we believe the EU will avert a funding crisis. The euro willexperience significant volatility, but is unlikely to trade tonew lows versus the U.S. dollar.Overall, we look for commodities to continue at robust pricelevels in 2011.14 WINTER 2011 EARLY EDITION PERSPECTIVE AS AT DECEMBER 31, 2010