Data reflecting Canada’s international transactions show that foreign investment in Canadian securities dropped in April, largely due to increased merger and acquisitions (M&A) activity.
Foreign investors reduced their holdings of Canadian securities by $12.8 billion in April, $8.6 billion of which was in equities, StatsCan said in a release on Monday. The decline was the largest since December 2018.
With Canadian investors marginally reducing their holdings of foreign securities, international transactions in securities generated a net outflow of funds of $12.6 billion from the Canadian economy in April, StatsCan said.
The outflow was largely the result of M&A activity in Canada, which changed the geographical composition of investors’ portfolios.
When a Canadian firm is acquired by a foreign firm and the transaction involves the issuance of new shares, Canadian investors’ holdings of foreign shares increase as they receive new shares, and foreign investors’ holdings of Canadian shares decline as they render shares, StatsCan said in the release.
Stock market sales also contributed to the decline in foreign investors’ holdings of Canadian securities. On a sector basis, the reduction was mainly in energy and mining shares, StatsCan said.
Canadian investors reduced their holdings of foreign securities by $194 million in April, following a $1.3-billion investment the previous month, StatsCan said.
Specifically, Canadian holdings of foreign debt securities were down by $337 million in the month, while Canadian investment in foreign equities was $143 million.
While the activity in equities reflected significant issuances of new U.S. shares to Canadian investors following cross-border M&A in Canada, it was almost completely offset by sales of U.S. shares on the stock market, StatsCan said. The U.S. stock market increased by 3.9% in April.
For full details, read the StatsCan release.