Q: How significant is foreign buying/selling of Canadian stocks, in terms of the effect it has on share prices? I can't help but think that the current Canadian political situation, and weak dollar, is causing a lot of foreign money to stay away. I'm wondering if a more stable and business-friendly government, if/when the PC's get elected, would cause a significant influx of foreign investment into Canadian stocks. Do you think such a scenario would improve the performance of Canadian stocks?
5i Research Answer:
At the margin, foreign flows into Canadian stocks probably helps but Canada is such a small part of the global economy, we doubt there is an overly material amount of foreign assets chomping at the bit (and holding off) on investing in Canadian equities. Certainly, a stronger general economy would lift the companies that operate in it, and a stronger economy with stronger companies would attract more capital into Canada. But overall, we are not confident there is much of an investment thesis around foreign capital demand in Candaian equities, at least currently. Here is an article on the topic.