Canada's international transactions in securities

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Canadian investment in foreign securities continued to slow for the third consecutive month in July as residents acquired $3.6 billion worth, down significantly from a near-record $13.1 billion acquisition in April. Nearly two-thirds of July's investment was in foreign stocks while Canadian investment in long-term debt instruments was negligible in July after slowing down somewhat in June.

Meanwhile, non-residents acquired $1.5 billion worth of Canadian securities in July after two consecutive months of divestment totalling $6.7 billion. July's investment was mostly in Canadian shares as non-residents withdrew sizable amounts of Canadian money market instruments from their portfolios.

Canadians sell US government bonds and buy non-US bonds

Canadian investment in foreign bonds slowed significantly in July to $259 million after 19 months of uninterrupted robust acquisitions averaging $4.2 billion per month.

July's investment focus remained on non-US bonds as residents added $2.5 billion worth, the 24th month of straight purchases, while selling $2.2 billion worth of US bonds. The divestment in US bonds concentrated on government bonds, mainly on bonds with remaining term to maturity of less than 5 years or over 20 years. Meanwhile, Canadians acquired $556 million worth of US corporate bonds, slowing from five consecutive months of strong investment averaging $2.3 billion per month.

On a currency basis, Canadians acquired $2.1 billion of Canadian dollar-denominated foreign bonds, more than offsetting the divestment in foreign bonds denominated in other currencies. Maple bonds issued by non-US entities continued to attract Canadian investors in July.

Resident investors favour non-US money market instruments

Canadians continued to invest in foreign money market paper in July, buying $1.0 billion worth after acquiring $2.2 billion in June. Investment in non-US paper amounted to $1.3 billion, on par with the level of acquisition seen in June, and almost all in paper issued by non-financial firms.

Meanwhile, residents invested $222 million worth in US treasury bills as interest rates on three-month t-bills continued to favour investment in the United States in July. They also disposed of $521 million worth of US corporate paper, mainly paper issued by financial firms. On a currency basis, around 40% ($417 million) of July's acquisition was Canadian dollar-denominated.

Strong investment in US shares continues

Following two months of lacklustre investment totalling $723 million, acquisitions of foreign stocks picked up speed in July with Canadians buying $2.3 billion worth. Investment in US stocks remained robust for a second consecutive month at $1.7 billion in the context of declining stock prices in the United States and increasing uncertainties related to certain debt markets. Meanwhile, Canadians acquired $580 million worth of non-US stocks in July, after divesting $2.2 billion worth in June.

Small foreign investment in Canadian bonds

In July, non-residents invested $345 million in Canadian bonds, switching from a sizable disposition of $4.4 billion worth in June.

On a sector basis, July's foreign investment centred on Canadian corporate bonds and federal government enterprise bonds, totalling $703 million and $560 million respectively. Nevertheless, investment in both sectors declined significantly from June.

July saw non-residents acquire a nominal $213 million worth of federal government bonds, swinging from a near-record disposition totalling $5.5 billion in June. Investment was concentrated on bonds with remaining term to maturity of 5 to 10 years while non-residents sold a sizable amount of bonds maturing within 2 years or less.

On the other hand, non-residents continued to reduce their holdings of provincial government bonds, selling $1.3 billion worth following June's disposition of $2.4 billion worth.

On a currency basis, non-residents acquired $801 million worth of Canadian dollar-denominated bonds, largely outstanding issues. Meanwhile, they disposed of $451 million worth of Canadian bonds denominated in US dollars mainly due to bond retirements.

Non-residents switch to selling Canadian short-term instruments

In July, non-residents reduced $1.3 billion worth of Canadian money market instruments from their holdings, largely offsetting the $1.5 billion invested in June. Over three-quarters of July's divestment was in federal government treasury bills ($1.0 billion).

Substantial foreign acquisition of outstanding Canadian shares

Foreign investors replenished their portfolios with Canadian shares in July, acquiring $2.5 billion worth. Non-residents had previously divested $2.9 billion and $1.4 billion respectively in May and June, mainly due to sizable share retirements.

While retirements of Canadian shares continued to be important ($853 million), July's investment was fuelled by a $3.3 billion acquisition of outstanding shares. These were largely equities of Canadian firms that announced takeovers involving foreign investors but that had not yet closed.

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 July 2007 issue of Canada's International Transactions in Securities (67-002-XWE, free) will soon be available.

Data on Canada's international transactions in securities for August will be released on October 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 (613-951-2057), Balance of Payments Division

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