Canada’s international securities transactions showed a notable shift in November 2024, with Canadian and foreign investors making significant moves that affected the financial landscape. While Canadian investors increased their foreign holdings, foreign investors focused heavily on Canadian money market instruments, creating a unique situation in the global market.
In November, Canadian investors resumed their investment in foreign securities, injecting $17.8 billion into international markets. This represented Canadians’ highest level of foreign investment since March 2024, following a $2.7 billion divestment in October.
A significant portion of this investment – $11.9 billion – was directed toward foreign debt securities, including $10.3 billion in bonds. Within the total, non-US foreign bonds received a considerable share of $6.7 billion, while US bonds accounted for $3.6 billion.
Equity investments also played a role, as Canadian investors added $5.9 billion to foreign equities in November, reversing two months of divestment. Notably, US shares attracted the largest portion, amounting to $5.1 billion, as the S&P 500 Index surged by 5.7%, following a modest 1.0% drop in October.
On the other side of the ledger, foreign investors acquired $16.4 billion worth of Canadian securities in November, reflecting a robust international interest in Canadian markets. The largest portion of foreign investment was in debt securities, which saw acquisitions totaling $25.2 billion. The focus was on federal government debt instruments, particularly Government of Canada Treasury bills, which garnered a record $19.5 billion in foreign purchases.
The surge in foreign interest in Canadian money market instruments was unprecedented. The $19.5 billion investment was the highest recorded for these instruments, driven by a $15.3 billion purchase of federal Treasury bills. In addition, provincial and corporate bonds also saw increased demand, contributing to the overall surge.
While foreign interest in Canadian debt securities remained strong, the pace of investment in Canadian bonds slowed down. Foreign investors increased their holdings of Canadian bonds by $5.7 billion, a significant drop from the previous month’s totals. Within this, federal government bonds saw an increase of $7.1 billion, but private corporate bonds saw a dramatic slowdown, dropping to just $1.3 billion compared to $8.4 billion in October.
Despite this slowdown, foreign investment in Canadian bonds has been strong overall in 2024. Year-to-date, foreign investors have poured $191.6 billion into Canadian bonds, a significant increase from the $74.9 billion invested over the same period in 2023. Of this amount, more than half – $107.9 billion – has been directed towards government-issued bonds, reflecting the ongoing appeal of Canada’s federal debt.
In contrast to the rise in foreign investment in Canadian debt, November saw a notable divestment in Canadian equities. Foreign investors sold off $8.8 billion in Canadian stocks, reversing the trend of the previous two months when foreign investment in Canadian shares had totaled $24.7 billion.
The cumulative effect of these international transactions in securities resulted in a net outflow of $1.4 billion from the Canadian economy in November 2024. This was a stark contrast to the previous two months, which saw strong net inflows. The outflow signals a shift in the balance of capital moving in and out of the country, influenced by the varied investment strategies of both Canadian and foreign investors.
As the year progresses, these shifts in securities investment provide key insights into the evolving dynamics of Canada’s financial markets and its relationship with international investors. With a continued interest in government-backed securities and a cooling of investment in Canadian equities, the coming months may reveal further trends that will shape the country’s economic landscape.