Foreign investors abandon Canadian banks and bonds

Most of the selling in June was in Canadian equities, as foreign investors lost $12.6 billion worth of stocks, compared to $1.2 billion in May.

“Most of the foreign divestment was in banking sector stocks,” Statistics Canada said.

Foreign investors also sold $5.0 billion worth of Canadian debt securities in June, which was the first divestment since March 2021, he noted.

The divestment was driven by government debt, partially offset by investors adding corporate debt.

“Beyond this sharp sell-off in equities as risk aversion reigned, deep-rooted seasonal patterns colored bond flows,” National Bank Financial Inc. (NBF) said in a research note, adding that the Short-term redemptions tend to be high in June when many bonds mature.

Given the “seasonal quirks” in today’s data, NBF said, “Foreign flows aren’t as troubling as the headlines might suggest.

Despite surging foreign sales in June, cross-border investment in Canadian securities for the first half of the year remained positive at $82.0 billion, up from $69.2 billion for the same period in 2021, a noted Statistics Canada.

Conversely, Canadian investors disposed of $28.7 billion of foreign securities in the first half, compared to $93.6 billion of investments in the first half of 2021.

In June, Canadian investors sold $12.3 billion of foreign securities, including $9.6 billion of US stocks and $2.0 billion of foreign debt securities.

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