United States investors trimmed their holdings of Canadian stocks by nearly $600 million last year and are still selling, apparently in response to the Canadian government's nationalistic energy policies, according to securities analysts in New York and Toronto.
A report by the Securities Industry Association, the trade association of U.S. stockbrokers, said American investors reduced their Canadian stock investments by $582 million in 1981, canceling out most of the $642 million increase in their Canadian portfolios recorded the year before.
The disinvestment by Americans has contributed to the sharp overall decline of the Canadian securities market. In the first quarter of 1982, Canadian stock prices took their worst beating in almost 50 years. Trading volume plummeted, and the composite index of 300 stocks traded on the Toronto exchange dropped in value by 18.75 percent.
"There has been a huge disaster, caused largely by our famous national energy policy," said Murray D. Cox, director of research at the Investment Dealers Association of Canada. "There has been a severe decline in the per-share price of Canadian securities."
The government of Prime Minister Pierre Elliott Trudeau has been trying, through government action, to reduce foreign ownership of Canadian energy companies from 72 percent to 50 percent. Energy companies form a major component of the Canadian economy, and the government's attempt to restructure their ownership has caused what analysts describe as a substantial erosion of investor confidence.
The sell-off by Americans has had a far greater impact on Canada than a similar trend would have had in the United States because the Canadian securities market is far smaller. The value of all shares traded on Canadian exchanges last year was about $34 billion, while the value of shares traded on the New York Stock Exchange alone was $374.9 billion.
According to Carolyn Hildebrandt, associate director of research for the Securities Industry Assocation, there is no doubt about what prompted the American exodus from Canadian holdings. "The Canadian government's energy plan prompted a large sell-off," she said in her most recent report. She said prliminary figures show that the sell-off continued, though at a slower pace, in the first two months of 1982.
Overall, her report said, Americans bought and sold foreign stock worth $18.2 billion in 1981. They decreased their total foreign holdings by $2 million in those trades, with investment in European and Asian issues almost balancing the sell-off in Canada.