Official stats show overall preference for foreign securities
Canadian investors demonstrated a strong preference for foreign securities, particularly US equities, in the second quarter of 2025, although at a moderated pace from the record-setting May.
Canadian investors acquired $9.0 billion of foreign securities in June, a decrease from the $13.5 billion invested in May and while the majority of this investment still targeted foreign shares ($8.2 billion), the acquisition of US shares specifically fell to $5.7 billion in June, a notable drop from the $14.3 billion invested in May, according to the latest figures from Statistics Canada.
Canadian investment in foreign debt securities totaled $850 million in June, driven primarily by acquisitions of non-US foreign bonds (+$4.5 billion). At the same time, Canadian investors cut back on US debt securities, with a $7.5 billion reduction in US government instruments partly offset by a $3.7 billion increase in US corporate debt holdings.
Meanwhile, foreign investors showed signs of renewed, albeit modest, interest in the Canadian market.
Having divested from Canadian securities in May with $2.8 billion in net outflows, June saw foreign investors make their first net investment in Canadian securities since January, acquiring $709 million.
This investment was not in equities as foreign investors reduced their exposure to Canadian shares by $3.0 billion (following a $11.5 billion divestment in May), but was driven by acquisitions of Canadian debt instruments, including $6.9 billion in Canadian bonds following a $9.7 billion investment in May.
In June, international securities transactions resulted in a net outflow of $8.3 billion from the Canadian economy. This raised the total outflow for the second quarter to $43.7 billion, a level similar to that of the first quarter.
The market movements in June 2025 provide a crucial backdrop to the investment data.
Following a strong performance in May, both the Canadian and US stock markets continued their upward trajectory with the S&P/Toronto Stock Exchange composite index up 2.6% compared to the end of May, while the S&P 500 composite index saw an even more significant gain of 5.0%.
This positive market environment likely encouraged both Canadian and foreign investors to engage in portfolio adjustments, with Canadian investors continuing to add to their foreign holdings, albeit at a reduced pace.
The economic context also played a role in the investment flows.
The Bank of Canada held its policy rate at 2.75% in June. The foreign investment in Canadian securities, the first since January, was entirely driven by purchases of debt, particularly corporate and provincial government bonds. This suggests a cautious return to the Canadian market by foreign investors, who were still divesting from Canadian equities despite the rising S&P/TSX composite index.
