Foreign investors continue to shun Canada; Canadians investing abroad

Foreign investment in Canadian securities was $2.2 billion in May, the lowest level so far in 2018. Canadians add $5.7 billion worth to their foreign holdings

Mario Toneguzzi on foreign investors shunning CanadaForeign investment in Canadian securities slowed to $2.2 billion in May, down from $9.1 billion in April but Canadian investors resumed their investment in foreign securities by adding $5.7 billion worth to their holdings, mainly in foreign bonds, says Statistics Canada.

“The investment pattern in May, both inward and outward, reflected acquisitions of bonds and reductions in holdings of equities. Overall, Canada’s international transactions in securities generated a net inflow of funds of $4.6 billion in the Canadian economy in the first five months of 2018, compared with a net inflow of $72.8 billion for the same period in 2017,” said the federal agency on Monday.

“Foreign investment in Canadian securities was $2.2 billion in May, the lowest level so far in 2018. Non-resident investors added Canadian bonds to their portfolio, but reduced their holdings of money market and equity instruments.”

StatsCan said foreign investors acquired $7.3 billion of Canadian bonds in May, as they continued to increase their exposure to corporate bonds and reduce their exposure to government bonds. Foreign acquisitions of corporate bonds reached $8.6 billion, split between private corporate and government business enterprise bonds. Meanwhile, the divestment in government bonds was in the federal sector. Foreign investors have reduced their holdings of federal government bonds by $35.7 billion since December 2017, it said.

In the Canadian money market, foreign investors reduced their holdings of short-term paper by $2.3 billion in May. The divestment was mainly in private corporate paper. The activity marked a second monthly divestment in these instruments, following a $15.4 billion investment in the first quarter.

“Canadian investors added $5.7 billion of foreign securities to their portfolio in May, mainly in foreign bonds, following two months of divestment. Canadian investment in foreign debt securities was $9.2 billion in May, the sixth consecutive monthly investment in these instruments. The activity was led by acquisitions of foreign bonds, as investors added both U.S. and non-U.S. foreign bonds totalling $8.5 billion over the month,” added Statistics Canada.

“In May, the differential between U.S. and Canadian long-term interest rates widened to 73 basis points, with U.S. rates reaching their highest level since July 2011. Meanwhile, the Canadian dollar edged down against the U.S. dollar. Canadian investors reduced their holdings of foreign equities by $3.5 billion in May, the third straight month of divestment. The divestment was in U.S. instruments, mainly investment fund shares. Purchases of non-U.S. stocks moderated the overall divestment in the month. Canadian investors have reduced their holdings of U.S. equities by $23.7 billion since March 2018. U.S. stock prices were up by 2.2 per cent in May.”

Respected business writer Mario Toneguzzi is a veteran Calgary-based journalist who worked for 35 years for the Calgary Herald in various capacities, including 12 years as a senior business writer.

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