Foreign investors soured on Canadian stocks while Canadians bought US equities
International securities activity in Canada moderated in August as foreign investors acquired $25.9 billion worth of Canadian securities, while Canadian investors added $19.5 billion of foreign securities, resulting in a net inflow of $6.4 billion.
Foreign investment into Canadian debt securities surged, reaching $32.6 billion in August, making it the highest level since April 2024, but foreign investors divested $6.7 billion in Canadian shares in August, after investing $11.8 billion in July.
The data from Statistics Canada reveals that the equity sell-off was broad-based, impacting many sectors, notably energy and mining, although banking shares still saw some foreign buying. It came despite a 4.8% gain for the S&P/TSX Composite Index by the end of August compared with a month earlier, easily beating the 1.9% gain for the S&P 500 index south of the border.
Although the US index has seen an increase of more than 20% since the ‘liberation day’ turmoil in April, Stephen Lingard, SVP and co-head of multi-asset at CI Global Asset Management, told Wealth Professional that there are some reasons to be underweight US equities and more constructive on other markets.
The breakdown shows foreign acquisition of Canadian bonds of $31.2 billion in August, largely private corporate bonds denominated in US dollars and euros, with federal and provincial government bonds contributing too.
Meanwhile, domestic investors purchased $19.5 billion of foreign securities, continuing a robust trend from earlier in the year. The bulk of that acquisition centred on foreign equities with $21.2 billion in foreign shares, including $17.0 billion into US equities and $4.2 billion into non-US equities (the latter the highest since March 2024).
But Canadian investors reduced holdings of foreign debt securities by $1.7 billion. Notably, US government bond holdings fell by $7.9 billion in August.
The monthly release covers portfolio transactions in equity and investment fund shares, bonds and money-market instruments for both Canadian and foreign issues, excluding transactions between affiliated enterprises.
