2023 sees major global equity markets rise, with US shares up 24.5 percent
In December 2023, a significant financial trend was observed as Canadian investors acquired a record $29.4bn in foreign securities.
This historic level of investment was primarily driven by the purchase of foreign shares, totaling an unprecedented $29.5bn, with $23.2bn allocated to US equity securities and $6.3bn to non-US foreign shares, predominantly in European markets. The investment in US equity securities is the highest in three years.
These investments were largely concentrated on large capitalization technology shares and investment fund shares tracking broad US equity market indices. Additionally, Canadian acquisitions of non-US foreign shares reached $6.3bn, predominantly in European shares.
This investment period coincided with a general increase in major global equity markets, with US share prices, as measured by the Standard and Poor's 500 composite index, experiencing a rise of 4.7 percent.
In a contrasting financial move, foreign investors focused on Canadian securities, totaling investments of $10.4bn in December, primarily in debt instruments. This activity was somewhat balanced by a divestment in Canadian equity securities.
Notably, foreign investors added $11.0bn of Canadian debt securities to their portfolios, largely focusing on “private corporate debt securities,” new instruments denominated in US dollars and issued by Canadian chartered banks.
Government debt securities also saw significant interest, with non-resident investors acquiring $5.3bn, mainly in federal government bonds (+$4.3bn) and “provincial government paper” (+$3.7bn).
However, December also saw foreign investors divesting $532m from Canadian shares, marking the 11th consecutive month of such divestment in 2023.
Throughout 2023, major economies like the US, the UK, Canada, and the European Union witnessed a continuous increase in central bank policy rates, leading to higher borrowing costs. By the year's end, the Bank of Canada policy rates had reached their highest level since March 2001. Despite these increases, global stock market prices saw an upward trend in 2023.
Over the year, Canadian investors added $33.4bn of foreign bonds to their holdings, with a focus on foreign government bonds. This followed an even larger acquisition of $48.5 bn in 2022.
In the equity sector, there was a notable shift, with Canadian investors adding $13.1bn of US shares to their portfolios in 2023, a reversal from a divestment of $71.3bn in 2022. US share prices, as measured by the Standard and Poor's 500 composite index, were up by 24.5 percent in 2023, a significant recovery from the 19.4 percent decline in 2022.
Foreign investment in Canadian bonds remained strong in 2023, with non-resident investors acquiring bonds worth $79.7bn, following a higher investment of $149.3bn in 2022. The primary focus of these investments was on private corporate bonds, mainly new issuances in foreign currencies.
Conversely, foreign investors reduced their holdings of Canadian shares by $48.7bn in 2023, continuing from a $12.0bn divestment in 2022. Despite this, Canadian share prices, as indicated by the Standard and Poor's/Toronto Stock Exchange composite index, went up by 8.4 percent in 2023, reversing a decrease of 8.7 percent in the previous year.
