FX.co ★ Foreign Divestment in Canada Smaller than Expected

In May 2025, foreign investors reduced their holdings of Canadian securities by CAD 2.8 billion, a figure markedly lower than the anticipated CAD 7.3 billion decrease, marking the fourth consecutive month of outflows. The primary factor for this reduction was an CAD 11.4 billion divestment from Canadian equities, with significant sales occurring in the energy and mining, corporate management, and manufacturing sectors. Additionally, investors withdrew CAD 4.5 billion from money market instruments, chiefly from Government of Canada paper, which accounted for CAD 4.0 billion of the decrease. In contrast, acquisitions of Canadian bonds amounted to CAD 13.1 billion, a significant recovery from the CAD 25.1 billion outflow experienced in April. These bond purchases were largely focused on provincial securities, which saw an increase of CAD 8.0 billion, and federal securities, which grew by CAD 6.9 billion. This was somewhat offset by a CAD 4.2 billion divestment in private corporate bonds. Concurrently, Canadian investors increased their holdings of foreign securities by CAD 13.4 billion in May, a significant rise from the CAD 4.1 billion invested in April, largely driven by purchases of US stocks.