Canada's international transactions in securities
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Non-residents added a further $9.6 billion of Canadian debt and equity instruments to their holdings in December for an annual investment of $116.2 billion in 2010, led by Canadian bonds. On the other side of the ledger, Canadian investors sold $1.9 billion of foreign securities in December, mainly US stocks. On an annual basis, Canadians continued to reduce their exposure to foreign bonds.
Non-residents increase holdings of Canadian equities
Non-resident investors acquired $4.0 billion of Canadian portfolio shares in December, the largest since May. New equity issues accounted for two-thirds of this activity, with the bulk related to cross-border merger and acquisition activities. The remainder consisted of secondary market purchases of $1.2 billion of Canadian stocks, mainly in the gold and mining sectors. Canadian stock prices were up 3.8% in December, the sixth monthly increase in a row.
Foreign investment in Canadian bonds slows further
Non-resident investment in Canadian bonds eased to $3.1 billion in December, resulting in the lowest inflow on this account since March. Canadian corporate bonds drew most of the foreign investment in December, with $2.3 billion of private corporate bonds and $863 million of federal government enterprise bonds. This activity was mainly comprised of acquisitions of new bond issues.
Foreign purchases of federal bonds slowed to $247 million in December and non-residents further reduced their holdings of provincial bonds, reflecting sizeable retirements. Despite reduced activity in recent months, strong foreign investment in Canadian bonds in 2010 was led by record purchases of both federal and provincial government bonds.
Note to readers
All values in this release are net transactions unless otherwise stated.
The data series on international security transactions cover portfolio transactions in stocks, bonds and money market instruments for both Canadian and foreign issues.
Stoc k s include common and preferred equities, as well as warrants.
Debt securities include bonds and money market instruments.
Bonds have an original term to maturity of more than one year.
Money mar k et instruments have an original term to maturity of one year or less.
Government of Canada paper includes treasury bills and US-dollar Canada bills.
At the short-term end of the spectrum, non-resident investors added $2.6 billion of Canadian money market instruments in December, with the bulk US dollar-denominated. This consisted of $1.5 billion of provincial paper, following divestments from January to October, with the balance mainly in federal government enterprise paper. The Canadian dollar rose over par against the US dollar by the end of December, its highest level since May 2008.
Canadian investors sell US equities for a third month
Canadians sold $1.5 billion of foreign stocks in December, a third consecutive monthly divestment. A reduction in holdings of US stocks accounted for most of the divestment over the month. Notwithstanding the recent monthly divestments, Canadian investors acquired $13.2 billion of foreign equities in 2010, continuing a string of annual outflows dating back to 1982.
Canadians acquire foreign bonds for a second month
Following significant acquisitions in November, Canadian investors added a further $314 million of foreign bonds in December. This reflected activity in the maple bond market, moderated by a reduction in holdings of US government bonds, mostly the two-year benchmark bond. In December, US long-term interest rates posted their largest monthly increase in two years. On an annual basis, Canadian investors reduced their exposure to foreign bonds for a third year, but at a much slower pace than was the case in 2008 and 2009.
Canadians reduced their holdings of foreign money market instruments by $677 million, with a further divestment of US Treasury bills in December. On the other hand, Canadians acquired non-US foreign paper for a six consecutive month, mostly sovereign paper.
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 December 2010 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 January will be released on March 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; yiling.zhang@statcan.gc.ca), Balance of Payments Division.
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