Foreigners return to Canada's stock market

Foreign investors are piling back into Canada's Us$3.2-trillion stock market after a pandemic-driven exodus.

The nation's equities are on pace to record the highest foreign inflows since 2017, adding US$22.7 billion as of the end of April, according to Bloomberg calculations based on Statistics Canada data.

Overseas investors were net sellers in the past two years, partly because of a lack of large-cap tech stocks, the early winners of the pandemic.

Strong earnings outlook and an accelerating vaccine rollout have boosted

... confidence.

The S&P/TSX Composite Index has rallied nearly 16 per cent this year, outpacing the S&P 500 Index's 12-per-cent rise, thanks to its large weighting in cyclical and value stocks. Financial firms, materials stocks, and oil and gas companies — all beneficiaries of accelerating growth — make up 56 per cent of the Canadian benchmark.

The TSX is traditionally a destination for investors looking for a higher risk-reward ratio.

Rising commodity prices, a strong earnings outlook and an accelerating vaccine rollout have boosted investor confidence. The economy grew at a 5.6-per-cent annualized rate in the first quarter, despite COVID-19 measures.

A rising Canadian dollar has also helped encourage capital flows from foreign investors.

The loonie is the top-performing currency against the U.S. dollar among its G10 peers this year, partly because of higher prices for oil, lumber and other commodities the nation produces.