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The largest U.S. ETF tracking Canadian equities saw its biggest outflow in nearly four months Wednesday, suggesting American investors may be growing more wary of how tariffs will affect their neighbor’s economy.

The iShares MSCI Canada ETF, traded in the U.S. under the ticker EWC, saw an outflow of about $48-million, the most since March 6. Investors traded almost 5.6 million shares of the fund, marking the largest volume since March and twice the average daily turnover for the ETF in the past year. A big chunk of the trading activity came from one investor, who sold a block of 1.2 million shares worth $34-million yesterday, right before the market closed.

Canadian-focused ETFs tend to see inflows and outflows based on the outlook for oil prices but that seems to have changed in recent weeks, said Daniel Straus, vice president of ETFs and financial products research at National Bank of Canada.

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“What’s happening recently is there’s a new spate of headlines related to trade and trade wars and tariffs and I think that probably a lot of large institutional traders are trying to position their portfolios for what they see as significant headline risk,” Straus said in a phone interview. “For that reason, I think the flows might decouple from performance and from the oil markets in a way that breaks from the patterns we’ve observed in the past.”

Canada will impose tariffs on $16.6-billion worth of imports from the U.S. on July 1 in retaliation for U.S. tariffs on steel and aluminum.

The move comes after Canadian stocks hit a record high last week, with the S&P/TSX Composite Index closing at 16,450 on Friday before retreating amid rising trade fears. On Wednesday, Bank of Canada Governor Stephen Poloz also said the economy will warrant higher interest rates though they’ll be gradual.

EWC has $2.9-billion in assets and is the largest U.S.-listed ETF tracking Canadian equities. About 28 per cent of the fund’s exposure is in banks, about 12 per cent in oil and gas firms, and about 9 per cent in pipeline companies. EWC’s two largest holdings are Royal Bank of Canada and Toronto-Dominion Bank, which together make up about 16 percent of the fund’s weight.

The outflows join significant moves in the iShares S&P/TSX 60 Index ETF, or XIU, the largest Canadian-listed ETF that tracks Canadian stocks. XIU has seen $1.5-billion in outflows over the past four weeks to June 22, putting it on track for the largest monthly decline in assets since last September. XIU has about $10-billion in assets.

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