Canada's international transactions in securities

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May 2011 (Previous release)

Foreign investment in Canadian securities strengthened in May to reach $15.4 billion, led by investment in federal government debt instruments. Meanwhile, Canadian investors acquired $6.0 billion of foreign stocks while removing $2.5 billion of foreign debt instruments from their holdings.

Foreign portfolio investment in Canadian securities

Chart description: Foreign portfolio investment in Canadian securities

Non-resident investors favour Canadian federal government debt instruments

Foreign acquisitions of Canadian bonds increased further in May to $11.1 billion. Foreign activity in the Canadian bond market was almost all in bonds issued by governments and their enterprises. Federal government bonds accounted for nearly half of the inflow over the month, while the remaining balance was almost equally split between provincial government bonds and federal government enterprise bonds. In contrast, foreign investors reduced their holdings of Canadian private corporate bonds for the first time since August 2009.

On a geographical basis, US investors again accounted for most of the investment in Canadian bonds in May. However, the largest increases came from investors in the United Kingdom and Asia. In May, overall net new issues of federal government bonds reached their highest level in nearly two years and long-term interest rates were down by 19 basis points.

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.

Non-residents also invested $3.3 billion in the Canadian money market in May, following a $3.0 billion foreign acquisition in April. Foreign investment again focused on Canadian Treasury bills as Canadian short-term interest rates remained above their US counterparts by the largest amount since November 2008. In addition, foreign investors increased their holdings of Canadian corporate paper in May, mostly instruments issued by banks.

Foreign acquisition of Canadian stocks on the secondary market slows

Non-residents acquired Canadian stocks for the 10th consecutive month in May, adding $1.0 billion to their holdings. Foreign purchases on the secondary market accounted for almost all the inflows over the month. This was however the lowest amount of Canadian stocks acquired by foreign investors on the secondary market since November 2010. Non-residents favoured shares of Canadian energy and resources firms and sold technology shares. Canadian equity prices declined for a third consecutive month in May, following eight months of increases.

Canadians further reduce their holdings of US government debt instruments

Canadian investors removed $2.4 billion from their holdings of foreign bonds in May, on par with the activity recorded in March and April. Divestment in all three months focused on US government bonds and gradually targeted longer term-to-maturity bonds. This was partially offset by the largest Canadian investment in maple bonds so far in 2011.

Residents reduced their holdings of foreign money market instruments by $128 million. This third consecutive monthly divestment was led by another reduction in Canadian holdings of US Treasury bills. In May, US short-term interest rates fell to their lowest level since December 2008.

Canadian investors increase their holdings of foreign stocks

Canadians added $6.0 billion of foreign stocks to their portfolios in May, the largest acquisition since April 2007. Purchases in May targeted the US stock market and, to a lesser extent, the Japanese market. In May, major world equity markets posted losses. Residents have acquired $9.1 billion of foreign stocks so far in 2011, on par with the amount acquired during the same period in 2010. However, this year's acquisition is almost entirely comprised of US shares, as opposed to an equal amount of US and non-US foreign shares in 2010.

Canadian portfolio investment in foreign securities

Chart description: Canadian portfolio investment in foreign securities

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 May 2011 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 June will be released on August 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.