New figures for January show the largest reduction in foreign equities since March 2020
Even before the Ukraine crisis raised risk for global economies, Canadian investors were pulling back from foreign equities.
Statistics Canada’s new figures for January reveal a $19.7 billion reduction in holdings of foreign equities, the largest pull-back since March 2020.
US equities were top of the ‘sell’ list - $16.9 billion were offloaded by Canadian investors in the month as the S&P 500 dropped more than 5%.
Canadian investors acquired $5.3 billion in foreign bonds as the Fed began interest rate hikes. The acquisitions were split between US corporate bonds ($2.6bn) and other foreign bonds ($2.4bn), giving a net reduction in foreign securities of $14.4 billion.
Foreign investors ease holdings
Meanwhile, foreign investors acquired $13.5 billion of Canadian securities, mainly bonds, although this was the lowest investment since April 2021.
The total net investment in bonds was $17.7 billion including an $18.3 billion investment in private corporate bonds, mainly new bonds denominated in foreign currencies and issued by Canadian chartered banks.
Foreign investors pulled back from private corporate paper and other money market instruments. Canada’s short- and long-term interest rates moved higher in January.
Although foreign investors reduced their holdings in Canadian equities by $731 million, this followed $16.9 billion in acquisitions in the previous month.
International transactions in securities generated a net inflow of funds of $27.9 billion in the Canadian economy in January, the largest monthly inflow since April 2020.
Recent figures show that Canada’s net foreign asset position – the difference between Canada's international financial assets and international liabilities – increased to more than $1.7 trillion in Q4, 2021.
