Official stats for October show the end of a four-month run of increasing investments
Canadian investors pulled back from U.S. shares in October, leading a $8.2 billion divestment in foreign securities following four monthly investments totalling almost $43 billion.
The latest data from Statistics Canada reveals that the divestment of U.S. shares totalling $8.3 billion was focused on large cap firms. The S&P 500 was down 2.2% in October.
The reduction in equities was partly offset by increased investment in U.S. debt securities with $1.5 billion of government paper and $1.2 billion of corporate bonds added to holdings. Canadian investors also reduced their exposure to non-U.S. foreign short-term and long-term debt securities by $1 billion each, mostly government instruments.
Meanwhile, non-resident investors cut their exposure to Canadian securities by $15.8 billion in October, following a $15.1 billion divestment in the previous month.
This was driven by an unprecedented divestment in private corporate debt instruments totalling $17.3 billion, mostly due to the retirement of U.S. denominated short- and long-term instruments. But this was moderated by the highest investment in Canadian government paper since June, $3.8 billion in federal government instruments and $2.3 billion in provincial governments.
Canadian equities were also out of favour with foreign investors selling $2 billion worth, bringing the year-to-date figure to $42.2 billion. The S&P/TSX Composite Index was down 3.4% in October. In September, foreign investors had acquired $1.6 billion in Canadian shares, with the manufacturing and transportation sectors most attractive while Canadian banking shares were among the most sold.
The picture may well change again when November’s data is released next month, as Canadian equities were running hot then, with a rise of 7% over three weeks and looking favourable compared to international peers.
The stats mean that international transactions in securities generated a net outflow of funds of $7.6 billion from the Canadian economy in October.
