Canadian investors shy away from foreign stocks

Canadian investors moved away from foreign securities in January just as U.S. stocks were rebounding after a dismal 2022, data from Statistics Canada shows.

Canadian investors reduced their exposure to foreign securities by $16.2 billion in January, making it the largest divestment since the onset of the Covid-19 pandemic in March 2020. Of the outflow, $15.4 billion was in stocks, split almost evenly between U.S. shares ($7.7 billion) and other foreign shares ($7.6 billion).

The outflow came just as U.S. stocks rebounded: the S&P 500 index was up 6.2% in January after declining by 19.4% in 2022.

Canadian investors also reduced their foreign bond holdings by $1.5 billion, StatsCan reported.

Meanwhile, foreign investors flocked to Canadian corporate bonds in January, adding $11.7 billion, much of it targeting new bonds denominated in non-U.S. foreign currency. After $13.6 billion flowed into Canadian money market funds in December, foreign investors followed up with only $709 million to those instruments in January.

Foreign investors trimmed exposure to Canadian equities by $5.5 billion as the S&P/TSX Composite index rose by 7.1%.

“The divestment activity focused on shares of the trade and transportation industry and, to a lesser extent, of the energy and mining industry,” StatsCan said.

Overall, international transactions in securities generated a net inflow of $20.4 billion in January, following a net inflow of $151.0 billion in 2022.

Mark Burgess

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Mark was the managing editor of Advisor.ca from 2017 to 2024.