Canada's international transactions in securities

In October, foreign investors made their largest monthly investment in Canadian securities thus far in 2002, $3.8 billion, as they bought debt instruments but sold equities. At the same time, Canadian investors sold off a record amount of foreign securities, mostly foreign bonds.

Large foreign investment in Canadian bonds

Foreign investors made their largest investment in Canadian bonds so far in 2002, adding $4.3 billion to their holdings in October. Foreign investors added $6.7 billion to their holdings of bond issues of Canadian governments and their enterprises, but reduced their holdings of corporate bonds by $2.5 billion. Foreign acquisitions of Canadian bonds were largely in the secondary market for federal government issues.

This was in contrast to the first seven months of 2002, when foreign investors favoured corporate bonds, buying $12.1 billion worth, of which $10.1 billion were for net new issues (new issues less retirements). October's investment came from European and Japanese investors; American investors were sellers for the first time in 13 months.

Canadian investors sell-off record amount of foreign securities

Canadian investors sold off a near-record $2.9 billion of mainly US treasuries in October, after acquiring $1.8 billion of foreign bonds in September. So far in 2002, however, Canadian investors have added $3.3 billion worth to their holdings of foreign bonds, compared with no net investment in foreign bonds for the same period of 2001.

Canadian investment in foreign stocks has slowed since April and turned into a record $0.6 billion divestment in October, consisting entirely of overseas equities. There have been few divestments of foreign stocks by Canadian investors over the past decade.

Foreign investors buy short-term paper but again sell equities

Foreign investors returned to the Canadian money market with a small $0.4 billion investment in October, after having reduced their holdings by $2.0 billion over August and September.

Although the cumulative investment by foreign investors in the first ten months of 2002 has been negligible, the same period of 2001 saw a near $8 billion reduction in foreign holdings of Canadian money market instruments. An investment of $0.8 billion made by European investors in October was partly offset by a divestment by American investors.

In October, Canadian short-term rates fell a further 10 basis points and comparable US rates fell just 5 basis points, resulting in a narrowing of the gap to 115 basis points, continuing to favour investment in Canada.

Foreign investors reduced their holdings of Canadian stocks by $0.9 billion in October, similar to September. October's reduction continued to be focussed on secondary market shares with very little activity occurring in the areas of new share offerings or mergers and acquisitions. The selling continued to come from American investors. Canadian stock prices (S&P/TSX composite index) managed a small 1.1% gain in October, after registering a sharp 6.5% loss in value in September. October's gain was only the third in the first ten months of 2002.

Available on CANSIM: tables 376-0018 to 376-0029 and 376-0042.

Information on methods and data quality available in the Integrated Meta Data Base: survey numbers, including related surveys, 1532, 1534, 1535 and 1537.

The October 2002 issue of Canada's international transactions in securities (67-002-XIE, $14/$132) will be available soon.

For more information, or to enquire about the concepts, methods or data quality of this release, contact Donald Granger (613-951-1864), Balance of Payments Division.