New data suggests that Canadian securities are falling out of favour with foreign investors, while Canadians are investing more of their money abroad.
On Thursday, Statistics Canada released tracking data on Canada’s international securities transactions in May, which found there was “strong foreign divestment in Canadian shares” during the month.
“Foreign investors reduced their holdings of Canadian securities by $2.8 billion in May, a fourth consecutive monthly divestment,” the agency said in a release.
“In May, non-resident investors reduced their exposure to Canadian shares by $11.4 billion. On a sector basis, the divestment in May was widespread, led by shares from the energy and mining, management of companies and enterprises, as well as manufacturing sectors.”
Foreign investors did, however, increase their holdings of Canadian government bonds, acquiring $13.1 billion compared to a $25.1 billion divestment in April.
“The activity in May reflected foreign acquisitions of provincial (+$8.0 billion) and federal (+$6.9 billion) government bonds, which were moderated by a divestment of $4.2 billion in private corporate bonds,” said StatCan.
Despite the overall divestment in Canadian shares, Canada’s benchmark stock index, the S&P/TSX composite, increased by 5.4 per cent in May compared to April after three consecutive monthly declines.
Canadians move money out
Canadian investors, meanwhile, increased their exposure to foreign securities by $13.4 billion in May, up significantly from $4.1 billion the month before, according to StatCan.
“In May, investors targeted U.S. shares, while reducing their exposure to U.S. government debt instruments,” the agency said.
“Canadian investors bought $11.5 billion of foreign shares in May, the largest investment since February. Sizable acquisitions of U.S. shares (+$14.2 billion) in May were moderated by sales of non-U.S. shares (-$2.8 billion).”
The benchmark American stock index, the S&P 500, increased by more than six per cent in May compared to April after it, like the TSX, had declined for three straight months prior.
StatCan said that when it came to Canadian purchases of foreign debt securities in May, investors mainly purchased U.S. corporate bonds and non-U.S. bonds, while reducing their holdings of U.S. government bonds and Treasury bills.
As a result of increased investment abroad and the foreign divestment of Canadian securities, Canada saw a net outflow of $16.2 billion from its economy in May, marking “a fourth consecutive month of net outflows, bringing the total to $83.9 billion,” said StatCan.
