Foreign investors have been significantly reducing their holdings of Canadian securities over the past couple of months, according to information made publicly available by Statistics Canada.
Via Statistics Canada,
“Foreign investors reduced their holdings of Canadian securities by $1.2 billion in July [2019], the fourth decline in five months.”
Moreover,
“From January to July, foreign investors reduced their holdings of federal government bonds by $7.8 billion.”
One of the most recent and biggest declines in the foreign investment in Canada occurred in April 2019, when the foreign ownership of Canadian securities fell by $13.1 billion. Although it did bounce back $10.3 billion in May (perhaps somewhat thanks to news that the U.S. had removed steel and aluminum tariffs on Canada), foreign ownership of Canadian securities resumed its fall the following month.
While foreign investment in Canada declined over the past few months, Canadian investment in foreign companies increased.
Via Statistics Canada,
“Canadian investment in foreign securities accelerated to reach $12.5 billion in July, the third consecutive monthly increase. This was the largest investment since October 2018. Investors purchased an equivalent amount of foreign bonds and foreign shares in the month.”
Foreign debt securities (mainly non-U.S. foreign bonds and U.S. corporate bonds) made up $6.6 billion of the aforementioned $12.5 billion July total.
Wrapping Up
Despite the fact that global equity markets rose in April 2019, foreign investors chose to divest themselves of Canadian securities, contributing to what has become a prolonged decline in the foreign ownership of Canadian securities. At the same time, Canadian investors opted to increase their holdings of foreign securities. The fact that both foreign and Canadian investors are beginning to look elsewhere for investment opportunities begs the question: without a thriving investment environment, how can Canadian companies expect to grow, and more importantly, innovate?
