Canada's international transactions in securities

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Non-residents had net purchases of Canadian securities for a seventh consecutive month in June, as heavy acquisitions of Canadian bonds showed no sign of abating. June's $7.2 billion foreign acquisition of Canadian securities completed a record second quarter investment of $27.6 billion.

Meanwhile, Canadians reduced their holdings of foreign securities by $9.5 billion, in the face of lacklustre global equity markets and a deteriorating US credit market. Nearly two-thirds of the divestment was in foreign shares with the rest largely in US government bonds.

Robust foreign acquisitions of Canadian debt instruments continue

Foreign investors' demand for Canadian bonds remained strong in June as they bought $6.2 billion worth, resulting in the largest quarterly investment since the fourth quarter of 2001.

June's foreign investment was dominated by a strong take-up of new issues of bonds from the federal government enterprise sector (a net $3.8 billion), which offered attractive yields and were well-subscribed by global investors.

Foreign investment in outstanding federal government bonds also picked up speed ($2.7 billion) in June. This activity was driven by demand for the five-year benchmark bond. Overall, foreign holdings increased marginally as sizeable amounts were retired.

Non-residents acquired a further $657 million worth of Canadian money market paper in June, as the investment focus shifted from provincial to federal government paper. In June, Canadian short-term interest rates posted the second lowest level in nearly three years.

Non-residents add new issues of Canadian equities to portfolios

Non-residents acquired Canadian stocks for a fifth straight month in June but at a much slower pace, buying $362 million. All the investment was in new shares ($1.1 billion), as foreign investors sold $763 million worth of Canadian stocks in secondary markets. June saw a 1.7% decrease in Canadian stock prices.

Canadians reduce their holdings of foreign debt securities

Canadians sold $2.9 billion worth of foreign bonds in June, the largest divestment since November 2007. Most of the reduction was in US government bonds, concentrating on the two-year and five-year issues. Prices of these bonds hit their lowest level in six months.

Meanwhile, Canadians resumed the trend away from foreign short-term paper initiated in August of 2007, disposing of $475 million in June. Since the credit turmoil, Canadians have been divesting themselves of foreign money market paper for four consecutive quarters, reducing their holdings by nearly two-thirds over this period.

Canadians dispose of substantial amounts of non-US foreign stocks

Canadians sold $6.2 billion worth of foreign stocks in June, after four consecutive months of acquisitions averaging $4.0 billion per month, in line with weakened stock prices in major world markets over the month.

Nearly 90% of June's divestment was in non-US foreign stocks, as Canadian residents sold off more than what they acquired in May. Canadians also sold US stocks after four months of purchases. US stock prices fell 8.6% in June, the largest monthly drop since September 2002.

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 June 2008 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 July will be released on September 17.

For more 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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