Canadian investors piled into U.S. stocks in June: StatsCan

Foreign investors returned to Canadian equities in June, but Canadian investors snapped up record amounts of foreign securities during the month, according to new data from Statistics Canada.

StatsCan reported that Canadian investors acquired a record $28.1 billion in foreign securities in June. The bulk — $20.8 billion — went into U.S. stocks, marking the second highest monthly total on record (trailing only the activity in December 2020).

Once again, investors targeted large cap U.S. tech stocks, StatsCan reported.

Alongside the surge in equities buying, Canadian investors added $6.2 billion worth of foreign debt in June, led by $2.6 billion in non-U.S. bonds and $2.4 billion in U.S. Treasuries.

In the first half of this year, Canada investors added $94.2 billion in foreign securities, largely driven by acquisitions of U.S. stocks. By comparison, in the first half of 2020, investors shed $21.2 billion in foreign assets.

At the same time, foreign investors bought $19.6 billion worth of Canadian securities in June — primarily money market instruments, which saw an $18.8-billion inflow, the highest level in six years, StatsCan said. Most buying focused on federal T-bills and provincial government paper, the agency noted.

Foreign investors also resumed buying Canadian equities, adding $918 million in the month after a $3.3-billion divestment in May.

“Investors mainly targeted shares of the information and cultural industry,” StatsCan reported.

In the first half, foreign investors bought $26.1 billion worth of Canadian equities, StatsCan reported. Last year, investors sold $33.1 billion in stocks during the same period.

Conversely, investors reduced their holdings of Canadian bonds by $52 million in June, StatsCan said, after buying $17.8 billion in May and $5.5 billion in April.

“The activity in the month reflected net retirements of federal government enterprise bonds moderated by new issues of private corporate bonds, mainly U.S. dollar-denominated instruments by Canadian chartered banks,” StatsCan said.

In a research note, National Bank Financial (NBF) stressed that the decline in Canadian bond holdings, particularly issues denominated in Canadian dollars, reflected the inherent seasonality of the market, with a lot of maturities “clustered into June.”

“Don’t be too bothered by the seasonally influenced unloading of Canadian bonds in June. It’s likely that a good portion of the money pushed into Canada’s money market in June was a placeholder for a foreign investor base loaded up with cash as their bond holdings matured and coupons were paid,” NBF stated.

Overall, foreign investors added $63.5 billion worth of Canadian securities in the first half, compared with $90.0 billion for the same period in 2020.

With Canadian investor buying outpacing foreign inflows in June, the economy recorded a net outflow of $8.5 billion for the month. In the first half, portfolio outflows totalled $30.6 billion.

“After seeing massive inflows during the greatest volatility in markets last year, as investors were seeking out the safety of Government of Canada bonds, there has been a trend of net outflows,” CIBC Economics said in a research note.