Canada's international transactions in securities

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Foreign acquisitions of Canadian securities fell to $351 million in July, following investment of $61.9 billion over the first six months of 2009. Non-residents rebalanced their holdings of federal government debt instruments by disposing of short-term paper in July and acquiring bonds. Meanwhile, Canadians sold $526 million of foreign securities as divestment in debt instruments continued and investment in foreign stocks slowed.

Foreign investors move to Canadian bonds from money market instruments

Non-residents adjusted their portfolios of Canadian debt instruments in July by adding $3.6 billion of bonds and reducing their holdings of money market instruments by a similar amount. Most of this activity was concentrated in federal government securities.

Foreign investment in Canadian bonds was from secondary market transactions, with little new issue activity in July. Non-residents picked up $2.6 billion of federal government bonds, with the balance accounted for by corporate debt securities. Since January 2009, non-residents have added $45.7 billion of Canadian bonds to their holdings, already exceeding any previous annual investment activity.

At the short-term end of the spectrum, sizeable retirements of federal government paper in July led to foreign investors removing $3.9 billion from their holdings over the month.

Non-resident demand for Canadian equities eases

Non-residents continued to buy Canadian shares but at a much slower pace in July, adding $612 million. Foreign acquisitions of bank and financial shares continued to be robust but were partly offset by divestment in energy and gold stocks. In July, Canadian stock prices posted a fifth straight monthly gain, reaching their highest level since September 2008.

Canadians sell foreign debt instruments

Canadian investors continued to reduce holdings of foreign debt instruments in July, disposing of $625 million in foreign bonds and $725 million in foreign money market instruments. Divestment was focussed in debt instruments of the US government and its agencies.

For the US government sector alone, Canadians disposed of $932 million of bonds and $665 million of money market paper in July. This occurred against the backdrop of a weakened US currency and an expanding US government deficit.

Canadian demand for foreign equities slows

Canadian investors added a moderate $824 million of foreign shares in July, compared with a $3.8 billion acquisition the month before.

Canadian investment in July focussed on non-US foreign equities. Canadians acquired shares of corporations in emerging economies while selling European energy stocks. Acquisitions also included $237 million of US shares as US stock prices (as measured by the Standard & Poor's composite index) rose 7.4% in July.

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 2009 issue of Canada's International Transactions in Securities (67-002-X, free) will soon be available.

Data on Canada's international transactions in securities for August will be released on October 19.

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; yiling.zhang@statcan.gc.ca), Balance of Payments Division.