The hollowing out of Canadian equity markets is overblown according to the June issue of the Bank of Canada’s Financial System Review.

The review finds that the share of corporate bonds issued in Canadian dollars (and placed in Canada) has remained fairly steady at about half all corporate bonds issued by Canadian firms over the past 15 years or so.

It also concludes that although Canadian equity issuers are turning more to foreign markets, the extent of that reliance is currently small. According to the review, the percentage of Canadian-based firms inter-listing on U.S. exchanges has increased only modestly in the last decade, to about 15%, little changed since the mid-1980s.

The report also finds that there has been a downward trend in the number of firms listing exclusively on U.S. exchanges.

“Thus, while there has been somewhat increased reliance on foreign sources of funds over the last decade, the data reviewed here do not provide much support for the view that domestic capital markets have been abandoned by Canadian firms or have been “hollowed out” in recent years,” it says.

The review concludes that “As long as Canadian residents wish to hold Canadian-dollar assets — and there is little reason to suppose that they would not for the foreseeable future — then there will be a demand for such assets. Accordingly, there will be incentives for governments and domestic firms to supply Canadian-dollar securities, including corporate bonds and equities.”