- Canada’s international transactions in securities: Canadian investors sold $16.2 billion worth of foreign securities in January 2023, with $15.4 billion of foreign shares sold. This was the largest divestment since March 2022, with US and non-US foreign shares being equally affected.
- Meanwhile, non-residents invested $4.2 billion in Canadian securities in January 2023, which is significantly lower than the $21.2 billion investment in December 2022.
- International transactions in securities resulted in a net inflow of $20.4 billion in the Canadian economy in January 2023, down from the $151.0 billion net inflow in 2022.
The article reports on Canada’s international transactions in securities for the month of January 2023. The data, released by Statistics Canada, reveals a net inflow of funds of $20.4 billion in the Canadian economy, with non-residents acquiring $4.2 billion of Canadian securities in the month.
Canadian investors sell foreign shares
Canadian investors reduced their exposure to foreign securities by $16.2 billion in January 2023. The sale of foreign securities marks the largest divestment since March 2022. The investors sold $15.4 billion of foreign shares over the month, with almost half of the sales going to US shares ($7.7 billion) and non-US foreign shares ($7.6 billion).
Investors’ decision to sell foreign shares can be attributed to US share prices increasing by 6.2% in January, as measured by the Standard and Poor’s 500 composite indexes, after a decline of 19.4% in 2022.
Canadian investors also reduced their holdings of foreign bonds by $1.5 billion in January 2023, a second consecutive monthly divestment. The divestment mainly targeted US bonds in both December 2022 and January 2023. This trend is likely due to US long-term interest rates exceeding Canadian rates for five consecutive months, coupled with the Canadian dollar depreciating against the US dollar.
Non-resident investors target Canadian corporate bonds
Foreign investment in Canadian securities was $4.2 billion in January, led by acquisitions of corporate bonds. The overall foreign investment was down considerably in January compared with December 2022, mainly due to lower investments in money market instruments.
Foreign investors acquired $11.7 billion of Canadian corporate bonds in January 2023, the largest investment in five months. The investment targeted new bonds denominated in non-US foreign currency.
However, foreign investment in money market instruments slowed to $709 million in January, down from $13.6 billion in the previous month. The slowdown was observed in both the government and corporate sectors. In January 2023, Canadian short-term interest rates rose to their highest levels since July 2007, while long-term interest rates fell to their lowest levels in six months.
Non-resident investors reduce their exposure to Canadian equity securities
Non-resident investors reduced their exposure to Canadian equity securities by $5.5 billion in January 2023. The divestment activity focused on shares of the trade and transportation industry and, to a lesser extent, the energy and mining industry.
As measured by the Standard and Poor’s/Toronto Stock Exchange composite index, Canadian share prices rose by 7.1% in January, more than offsetting the decline recorded in December 2022.
In conclusion, the January 2023 data on Canada’s international transactions in securities revealed a net inflow of funds of $20.4 billion in the Canadian economy, with non-residents acquiring $4.2 billion of Canadian securities in the month. The trend of Canadian investors selling foreign securities and non-resident investors reducing their exposure to Canadian equity securities continued in January 2023. However, foreign investment in Canadian corporate bonds saw an increase in January 2023, while investment in money market instruments slowed down.