Canadian investors flocked to the US stock market in December, leading to a significant portfolio outflow to finish the year off. Despite the unprecedented outflow, however, Canada’s economy still recorded an overall positive level of cross-border investment flows for the year.
According to Statistics Canada, Canadian investors bought $26.9 billion worth of foreign securities in December, marking the eighth straight month of strong purchases. The majority of transactions were US shares, which totaled a record $22.4 billion in the final month of the year. Acquisitions were primarily concentrated in shares that track broad US market indices, as well as shares of large capitalization firms concentrated in pharmaceuticals and technology.
Conversely, non-residents increased their Canadian securities holdings by $5.1 billion— the lowest level of investment in three months. Nonetheless, as a result of recent international transactions in securities, a $21.9 billion net outflow from the Canadian economy was recorded in the final month of the year. However for the entirety of 2020, cross-border portfolio investment still managed to create a net inflow of $87.1 billion into the economy.
Annually, foreign investors purchased a record $141.1 billion worth of Canadian debt securities last year. In contrast, investing activity during the 2009 global financial crisis only reached $86.5 billion. Federal government debt securities were the primary source of foreign investment in 2020, as non-resident investors bought $38.3 billion in federal government bonds, and $37.3 billion worth of federal government money markets instruments throughout the year. The Canadian federal government’s borrowing needs rose significantly in 2020, due to ongoing supports for Canadian households and companies amid the Covid-19 pandemic.
Information for this briefing was found via Statistics Canada. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.