Canada’s Foreign Investment Surge Isn’t Confidence, It’s A Looming Debt Crisis

Global investment in Canada is surging, but is it a vote of confidence or vultures circling? Statistics Canada (StatCan) data shows foreign investment boomed in May, prompting some outlets to frame the surge as a renewed confidence in Canada. BMO argues the composition tells a very different story. Investors aren’t piling into Canadian companies, but almost exclusively into bonds—mostly public debt, with a large share issued in foreign currency. Even that warning seems optimistic once you examine who’s actually buying the debt and how those purchases are financed. Canada Just Saw A Rare Capital Inflow of $256 Billion Last week’s foreign investment data sparked a wave of coverage proclaiming investor confidence in Canada. The 12-month rolling tally of non-resident portfolio investment reached a mind-boggling $256 billion in May, a level not seen in years. Coverage in Bloomberg stood out, with an “impressive chart,” says BMO chief economist Douglas Porter. “As noted in the piece, that’s a ‘pace rarely seen’—only topped in early 2022— which it claims is ‘a sign of confidence’,” notes Porter, leaving us with a pause that hints there’s a little more to this story. Most Of Canada’s Capit...