Canada’s foreign portfolio investment in Canadian securities was **-$5.57bn** in December. This was below the expected **$14.27bn**.
This means foreign investors pulled money out of Canadian securities during the month. The difference versus the forecast was **$19.84bn**.
Shift In Foreign Investor Sentiment
Foreign sentiment toward Canadian assets has turned weaker. December 2025 showed a **$5.57bn** net outflow, even though markets expected a **$14.27bn** inflow. That is a sharp reversal and the biggest outflow in more than 18 months. It suggests foreign investors are becoming less confident.
This is also a bearish sign for the Canadian dollar. With less foreign demand for CAD to buy Canadian securities, the currency may weaken further against the US dollar. USD/CAD has already climbed to **1.3850** in early February 2026 trading, and it could test **1.40** in the coming weeks.
Traders may look at buying US dollar call options or shorting Canadian dollar futures. Implied volatility on CAD options has risen to **8.9%**, showing higher uncertainty. These trades can help investors profit from, or hedge against, a weaker loonie.
Outflows can also add selling pressure to Canadian stocks. The **S&P/TSX Composite Index** benefited from foreign buying through much of 2025, but it now looks more exposed to a pullback. The index is already down **2.5%** since the start of February, with financial and resource stocks dropping the most.
Put options on TSX-tracking ETFs offer a direct way to position for a potential decline. Watch for institutional selling in major Canadian banks and energy producers, which often reflects foreign demand. A move below **21,000** on the TSX would support a more bearish trend.
Historical Parallels And Oil Link
This move is similar to 2014–2015, when falling oil prices led to sustained capital outflows from Canada. That period brought a long stretch of weakness in both the Canadian dollar and Canadian stocks. Today, WTI crude prices sitting just below **$70** a barrel are adding to these concerns.
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