Investors have responded to a jump for the S&P 500
Canadian investors significantly increased their exposure to foreign securities in May, acquiring $13.4 billion worth, more than triple the $4.1 billion invested in April.
The surge was primarily driven by a sharp rise in purchases of US equities, which alone totaled $14.2 billion, according to newly released data from Statistics Canada.
Canadians’ buying spree aligns with a 6.2% jump in the S&P 500 Index, reflecting growing investor confidence in the US market following months of volatility following President Trump’s uncertain stance on trade.
While investors leaned into US shares, they pulled back from US government debt with a net reduction of $2.8 billion in US Treasury bills and $1.3 billion in government bonds. However, Canadian buyers increased their holdings of US corporate bonds by $3.2 billion and non-US bonds by $2.8 billion, signalling a broader shift toward riskier, higher-yield investments amid rising interest rates.
Meanwhile, foreign investors continued to reduce their holdings of Canadian securities, divesting $2.8 billion in May, marking the fourth consecutive month of net foreign outflows and contributing to a cumulative $83.9 billion in capital flight since January.
Foreign divestment was most pronounced in Canadian equities, which saw an $11.4 billion selloff, despite a 5.4% rise in the S&P/TSX Composite Index, which rebounded in May after three months of declines. The selling was broad-based across sectors, with energy, mining, manufacturing, and corporate management stocks particularly affected.
Foreign holdings of Canadian money market instruments also fell, down $4.5 billion, primarily due to reduced positions in Government of Canada short-term paper.
However, not all areas experienced outflows.
Foreign investors returned to Canadian bonds, purchasing $13.1 billion worth in May following a steep $25.1 billion divestment in April. The renewed interest focused on federal and provincial government bonds, which saw inflows of $6.9 billion and $8.0 billion, respectively. These gains were partially offset by a $4.2 billion reduction in private corporate bonds.
Overall, international transactions in securities led to a net outflow of $16.2 billion from the Canadian economy in May.
