Canada's international transactions in securities

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Canadians bought  $2.6 billion worth of foreign securities in September, almost entirely foreign debt instruments. Although this was a significant slow down from a near-record $12.4 billion purchase in August, total purchases of foreign securities for the first nine months of this year have hit a record $61.6 billion, just short of the annual high of $63.9 billion posted in 2000.

Meanwhile, foreign investors reduced their holdings of Canadian securities by $3.1 billion in September, mostly equities. This was a reversal of the heavy investment since January 2006.

Record purchase of non-US bonds

Canadian purchases of foreign bonds remained robust in September, totalling $1.4 billion. Following a record purchase of $12.6 billion in the second quarter, the third quarter posted a strong $9.3 billion purchase as well.

A $3.1 billion record purchase of non-US bonds over the month more than offset a $1.7 billion sell-off of US bonds, mainly US government treasuries. The first three quarters saw Canadians buy $18.0 billion of non-US bonds. This has more than doubled the $8.4 billion record annual amount bought in 2005.

Record quarter for foreign money market paper

Canadians invested $1.1 billion in foreign money market paper in September. This was the third consecutive month of strong purchases for these instruments leading to a record third quarter investment of $5.0 billion. September's acquisitions were almost equally split between US paper and other foreign paper.

Big drop in purchases of foreign stocks

Canadians held back on further investments in foreign shares in September. Purchases plunged from $5.2 billion in August to $98 million in September. Nevertheless, Canadian acquisitions of foreign shares have been strong this year, totalling $24.2 billion over the first three quarters.

European investors sell outstanding Canadian shares

Non-residents sold off $2.7 billion worth of Canadian shares in September, after net purchases totalling $1.7 billion over the two previous months. September's divestment was entirely in outstanding Canadian stocks. Shares of Canadian mining, oil and gas firms topped the sell-off list.

Investors from European Union countries and the United States sold off $4.0 billion and $732 million worth of Canadian shares respectively. Meanwhile, these amounts were partially offset by a surge in purchases by investors from other overseas countries, totalling $2.0 billion.

Second small decline for Canadian bonds

For a second consecutive month, foreign investors decreased their holdings of Canadian bonds. The $664 million reduction in foreign holdings of these bonds in September was smaller than the $981 million divestiture in August.

On a sector basis, foreign holdings of Government of Canada bonds fell $3.3 billion, largely due to retirements. Meanwhile, foreign investors acquired $3.2 billion of new issues of federal enterprise bonds. In addition, non-residents sold $729 million worth of Canadian corporate bonds.

On a regional basis, $1.3 billion worth of Canadian bonds were sold back by European investors. This was partially offset as Asian and American investors bought Canadian bonds. Currency-wise, new bonds sold abroad contributed to an increase of $618 million in holdings of bonds denominated in foreign currencies, mainly US-dollar. Retirements lead the overall reduction of $1.3 billion in holdings of bonds denominated in Canadian dollars.

Purchases of Canadian money market paper slow

In September, non-residents acquired $334 million worth of Canadian money market paper, a slow down from the $915 million purchased the month before.

With the $181 million purchase of federal treasury bills offsetting a sell-off of provincial government paper, foreign acquisitions over the month were concentrated in Canadian commercial paper. Geographically, American and British investors were responsible for the buying as other non-residents sold some of their holdings.

Available on CANSIM: tables 376-0018 to 376-0029, 376-0042, 376-0058 and 376-0063.

Definitions, data sources and methods: survey number 1535.

The September 2006 issue of Canada's International Transactions in Securities (67-002-XIE, free) will soon be available.

Data on Canada's international transactions in securities for October will be released on December 18.

For general information or to order data, contact Client Services (613-951-1855; infobalance@statcan.gc.ca.) To enquire about the concepts, methods or data quality of this release, contact Yiling Zhang (613-951-1864), Balance of Payments Division.

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