Foreign investors are pulling out of Canada in droves, with the latest data demonstrating the largest outflow of Canadian equities in the nation’s history. Canada, previously regarded as a safe haven for investors, saw a net sell-off of $48.7 billion of Canadian equities in 2023. Investors do not want to stay in Canada, according to BMO Capital Markets, in an attempt to explain the TSX (Toronto Stock Exchange) record-breaking foreign investor sell-off.BMO’s research shows the Canadian stock market has lagged significantly, especially compared to the US. While the TSX climbed 8.1% in 2023, the US S&P 500 grew 24.2%. Chief Economist Douglas Porter at BMO said “the TSX lagged many of its peers and even the Dow.”“That underperformance has dragged into the opening weeks of 2024,” added Porter. “And now we have a big clue as to who is doing the selling.” “Over the past three decades, a ‘normal’ year would see net buying of about $12 billion — an inflow of about $1 billion a month, not the net outflow of $4 billion per month seen in 2023,” said Porter..The data from TSX regarding the foreign investor sell-off demonstrated the larger problem of Canada’s economy. Investors choose to put their money elsewhere because Canada’s dollar is seen as weak, per Canada's independent housing news outlet, Better Dwelling. When Canada’s stock markets falter, it fails to attract investors. The cohort of foreign investors pulling out of the Canadian market has weakened the dollar, as has another issue — Foreign Direct Investment (FDI). Canadians sent billions abroad to invest in foreign equities at a much higher rate than what foreign investors bring into Canada. “Combined with a steady net outflow in FDI, this helps explain why the Canadian dollar has struggled over the past year. Indeed, the surprise is that it didn’t suffer an even bigger setback,” said Porter. In the third quarter of 2023, Canadians sent nearly $9 billion more abroad than foreign investors sent to Canada, according to Better Dwelling.
