Canada sees $16.2 billion net outflow in May as investors move capital into US bonds and equities
Canada recorded a net outflow of $16.2bn in May as foreign investors continued to divest from domestic securities and Canadians increased their exposure to foreign assets, according to Statistics Canada.
This marked the fourth consecutive month of net outflows, bringing the total to $83.9bn.
The outflows were driven by two parallel movements: non-resident investors reducing their Canadian holdings by $2.8bn and domestic investors acquiring $13.4bn in foreign securities.
Foreign investors pulled $11.4bn from Canadian shares in May, with widespread reductions across the energy and mining, manufacturing, and management of companies and enterprises sectors, as reported by Statistics Canada.
There was also a $4.5bn foreign divestment in Canadian money market instruments, mainly government of Canada paper.
Despite the retreat from equities and money markets, non-resident investors acquired $13.1bn in Canadian bonds, following a $25.1bn divestment in April.
The May inflows included $8bn in provincial bonds and $6.9bn in federal bonds, partially offset by a $4.2bn divestment in private corporate bonds.
Canadian long-term interest rates rose during the month.
The S&P/TSX composite index rose 5.4 percent in May, rebounding after three months of consecutive declines.
Canadian investors increased their foreign exposure significantly, as per Statistics Canada, with $13.4bn invested abroad in May—more than triple April’s $4.1bn.
Of that, $11.5bn was allocated to foreign shares, including $14.2bn in US equities, moderated by $2.8bn in sales of non-US shares.
Canadian purchases of foreign debt totalled $1.9bn in May, led by $3.2bn in US corporate bonds and $2.8bn in non-US bonds.
Investors scaled back on US Treasury bills and US government bonds by $2.8bn and $1.3bn respectively, following two strong months of buying.
US short- and long-term interest rates also climbed in the same period.
The S&P 500 index increased by 6.2 percent in May, mirroring the Canadian market’s rebound after a similar three-month decline.
