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The country’s biggest lenders are Royal Bank of Canada and Toronto-Dominion Bank, along with Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada. Costa declined to name the banks Crescat was shorting. Representatives for Canada’s six biggest banks didn’t immediately comment or declined to comment.

Crescat’s short comes amid long-standing warnings from economists, investors and even the Bank of Canada about elevated consumer debt, which was driven higher by a decades-long housing boom. Canada’s ratio of household debt to income has been hovering at about 175 per cent for the past two years, compared with a peak of about 134 per cent in the U.S. at the height of its housing bubble in 2007.

Now Canada’s housing market is beginning to cool. Sales plunged 32 per cent in Vancouver last year and 16 per cent in Toronto amid rising interest rates, stricter mortgage rules and new taxes.

“China is in the process of reversing its key role as a driver of global economic growth,” the 29-year-old Costa said. “Countries like Canada and Australia, and their respective housing markets, are the economies most vulnerable in this scenario.”

Meanwhile, Crescat calculates that about 80 per cent of Canadian non-financial stocks have been cash-flow negative in the past 12 months, which he measures as cash flow from operations minus capital expenditures.

That may be inflated by the the large numbers of “zombie” companies on Canadian stock exchanges, which the Organisation for Economic Co-operation and Development defines as those 10 years and older and whose earnings aren’t high enough to cover interest payments on their debts. In a September study, Deloitte found 16 per cent of public companies on the Toronto Stock Exchange and its sister Venture Exchange are considered zombies, compared with 10 per cent globally.