Canadian assets were a popular holding for foreign investors in the first quarter (Q1), but that may not continue in the months ahead, according to report from National Bank Financial (NBF) published on Thursday.

Statistics Canada reported Thursday that foreign investors acquired $15.1 billion of Canadian securities in March, largely Canadian corporate instruments. This was offset by Canadian investors adding $15.4 billion of foreign securities to their holdings, primarily U.S. equities.

For Q1, StatsCan reports that foreign investment in Canadian securities exceeded Canadian investment in foreign securities by $28.8 billion. Foreign acquisitions of Canadian securities totalled $60.7 billion in the first quarter, up considerably from previous quarters, it notes.

In its report, NBF says that foreign investors’ Q1 activity included the acquisition of $26.4 billion in bonds and $38.2 billion in equities, offsetting divestment from money market instruments. However, NBF report also notes that, “The massive inflows are deceiving because the bulk of the record ‘inflows’ into equities is not due to purchases by foreigners but instead reflect a February M&A deal in which a Canadian company purchased a U.S. operation via an all-stock buyout.”

“To get a more accurate picture of foreign demand of Canadian securities in Q1 perhaps one should look at bonds,” the NBF report suggests. On that front, net inflows during the quarter were concentrated in corporate bonds, it says; at the same time, foreign investors added provincial and municipal bonds, and divested federal government bonds.

“While Canada was an attractive destination for foreign money in the first quarter, there is no guarantee it will remain so,” the NBF report concludes, “more so considering the TSX’s seemingly stretched valuations, rising interest rate differentials favouring U.S. securities, and enhanced uncertainties with regards to trade policy and the state of the housing market.”