Canadians significantly reduced foreign equities at the start of the year

Statistics Canada data shows a rise in foreign investment in Canadian securities

Canadians significantly reduced foreign equities at the start of the year
Steve Randall

Canadian investors pulled back from their focus on foreign equities as 2024 got underway, according to new data from Statistics Canada.

The significant reduction in exposure to foreign stocks of $7.6 billion in January was the highest in one year and followed the record high investment of $29.4 billion in December which helped add almost $290 billion to Canadian households’ net worth in the final three months of 2023, taking the total to more than $16.4 trillion.

Divestment of foreign equities was moderated by investment in foreign bonds, mostly from the U.S. government and other international organizations.  Divestment of $14.8 billion in foreign equity securities was split between U.S. and non-U.S. shares despite a gain for the S&P 500 of 1.7%.

Canadian government debt was in focus for foreign investors who acquired a total of $8.9 billion of Canadian securities in January. It was the third consecutive monthly investment and was mostly government bonds and those related to government business enterprises, while private corporate money market instruments saw divestment.

Total public sector debt securities acquired by foreign investors was $21.3 billion, unrivalled since November 2021 and comprising $14.1 billion investment in federal government debt instruments and a $6.6 billion investment in debt securities of government business enterprises. Meanwhile, private corporate paper was reduced by a record $15.5 billion, mostly related to retirement of banking industry instruments.

Canadian shares posted an unremarkable January in non-resident investor terms as retirements offset the $1.6 billion in secondary market acquisitions. The S&P/TSX Composite Index was up just 0.3% in January. 

As a result of overall activity, international transactions in securities generated a net inflow of funds of $16.5 billion in the Canadian economy.