Foreign investors dump Canadian banks, bonds

International transactions in securities generated a net outflow of $5.2 billion from the Canadian economy in June, StatsCan said, as foreign investors sold Canadian securities and Canadian investors reduced their foreign holdings.

The outflow was driven by foreign investors selling $17.5 billion worth of Canadian securities, which StatsCan said represented the largest divestment since December 2018. It was the first monthly divestment since the early days of the pandemic in July 2020.

Most of the selling in June came in Canadian equities, as foreign investors shed $12.6 billion worth of stocks, up from $1.2 billion in May.

“The bulk of the foreign divestment was in shares of the banking sector,” StatsCan said.

Foreign investors also sold $5.0 billion worth of Canadian debt securities in June, which was the first divestment since March 2021, it noted.

The divestment was driven by government debt, partially offset by investors adding corporate debt.

“Beyond this net selling of equities as risk aversion reigned, deeply entrenched seasonal patterns coloured bond flows,” said National Bank Financial Inc. (NBF) in a research note, adding that short-term redemptions tend to be high in June when many bonds mature.

Given the “seasonal quirks” in today’s data, NBF said, “Foreign flows aren’t nearly as troubling as headlines might suggest.”

Despite the surge of foreign selling in June, cross-border investment in Canadian securities for the first half remained positive at $82.0 billion, up from $69.2 billion for the same period in 2021, StatsCan noted.

Conversely, Canadian investors divested $28.7 billion worth of foreign securities in the first half, compared with $93.6 billion in investment for the first six months of 2021.

In June, Canadian investors sold $12.3 billion of foreign securities, including $9.6 billion of U.S. stocks and $2.0 billion of foreign debt.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.