Canada’s biggest businesses seem to be abandoning ship as it scouts overseas for investments, mergers and acquisition. It is fearful money on the run.
Nine of the 10 best-performing companies on the country’s benchmark stock index in the past two years have favored buying growth abroad rather than expanding at home.
Money is flooding out of Canada at the fastest pace in the developed world as the oil boom comes to an end and little else looks ready to take the industry’s place as an economic driver.
Canada’s basic balance — a measure of national accounts that spans everything from trade to financial-market flows — swung from a surplus of 4.2 per cent of gross domestic product to a deficit of 7.9 per cent in the 12 months ending in June, according to analysis from Bank of America Merrill Lynch.
That’s the fastest one-year deterioration among 10 major developed nations. More recent data on where companies and mutual-fund investors are putting their money show the trend extended into the second half of the year, suggesting demand for the Canadian dollar and the country’s assets is still ebbing.
Canadian companies, meanwhile, have been looking abroad for acquisitions. Royal Bank of Canada is expected to close its US$5.4 billion purchase of Los Angeles-based City National Corp. Monday, its biggest-ever takeover. It’s part of a net outflow of $73 billion this year for mergers and acquisitions, both completed and announced, according to Credit Suisse data.
Individuals are following suit. While international appetite for Canadian financial securities has held steady this year, domestic mutual-fund investors have pulled money from Canada-focused funds and plowed it into global choices for six straight months, the longest streak in two years, according to Investment Funds Institute of Canada data compiled by Bank of Montreal.