Is foreign investment losing steam?

While foreign investment in Canadian securities has been strong, numbers from Statistics Canada show it to be waning

Citing a report from Reuters, the Globe and Mail has reported that foreign investment in Canadian securities slowed for the fourth consecutive month in July.

Numbers from Statistics Canada showed that non-residents purchased $5.23 billion in securities, dipping from $9.02 billion in June and $14 billion in May.

On the bonds side, foreigners bought $6.22 billion worth, the majority of which came from the federal government. Money market investments, on the other hand, saw net sales of $2.91 billion from foreign investors.

Canadian equities contributed most to the collapse in foreign investment, falling from $13.41 billion in June to a mere $1.91 billion in July. The June showing was mostly made possible by company issuances of new shares to foreign portfolio investors resulting from cross-border mergers and acquisitions.

However, foreign purchases of Canadian equities demonstrated growth year on year. From January to July, foreign investors snapped up $28.13 billion in Canadian equities, dwarfing the $4.66 billion showing from the same six-month period in 2015.

Stock prices also represented a bright sport, as Canadian stock prices rose 3.7% from June to July, and 12.1% year to date.

Canadian investment in foreign securities reached $4.63 billion, with the majority being in US debt and equity instruments.

Analysts and experts have celebrated foreign interest in Canadian securities for the past few months, mostly attributing it to the perception that Canada is a relatively safe haven with decent yields. These latest statistics may be a sign of that perception fizzling out – which could mean that as foreign investors refocus and rebalance, the party in Canada’s financial market is about to wind down.

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