Canada saw its first foreign investment in domestic securities in nearly half a year in June, though Canadian demand for offshore assets far outweighed those inflows, leading to another sharp net outflow of funds.
Non-residents purchased $709 million worth of Canadian securities in June, reversing months of steady divestment. But Canadian investors added $9 billion to their foreign holdings. The imbalance produced a net $8.3-billion outflow from the Canadian economy for the month, bringing total outflows in the second quarter to $43.7 billion.
Debt markets accounted for nearly all the foreign inflows. Non-residents bought $6.9 billion of Canadian bonds, with corporate and provincial debt leading the way, though they reduced federal holdings by $1.3 billion. At the same time, they trimmed $3.2 billion from Canadian money market instruments, mostly private corporate paper.
Foreign investors continued to sell Canadian equities, cutting $3 billion in June after an even steeper selloff in May. The pullback centred on banking, trade and transportation stocks, partly offset by modest buying in manufacturing, energy and mining shares. Despite this, the S&P/TSX composite index gained 2.6 per cent over the month.
Purchases of U.S. equities reached $5.7 billion in June, following record acquisitions in May, with quarterly buying of American shares approaching $20 billion. The investment coincided with a five percent gain in the S&P 500 index. Investors also added $4.5 billion in non-U.S. foreign bonds.
Canadian capital continues to flow abroad at a far stronger pace than foreign capital is entering, underscoring Canada’s reliance on domestic investors while global markets deliver higher returns elsewhere.