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Canada's international investment position, third quarter 2014

Released: 2014-12-12

Canada's net international investment position advanced $94.5 billion in the third quarter. This resulted in a return to a net asset position of $25.6 billion, following the net foreign debt position posted in the second quarter. This change largely reflected a weaker Canadian dollar, which increased the value of Canada's international assets.

Geographically, the change in Canada's net investment position in the third quarter was composed of a reduction in net foreign debt position with the United States and an increase in net foreign asset position with the aggregate 'all other countries.'

Since the end of 2012, Canada's net international investment position has generally shown an upward trend, which culminated in the emergence of a net asset position in the fourth quarter of 2013. The re-evaluation effect of an overall weaker Canadian dollar over this period as well as relatively larger capital gains recorded on international assets than on liabilities contributed to this trend.

Chart 1  Chart 1: Canada's international investment position - Description and data table
Canada's international investment position

Chart 1: Canada's international investment position - Description and data table

International assets advance on lower Canadian dollar

Canada's international assets increased $79.7 billion to $3,131.4 billion in the third quarter. This mainly reflected the effect on Canada's foreign currency denominated international assets of the depreciation of the Canadian dollar against the US dollar. Approximately half of these assets constitute investments in the United States, and the Canadian dollar lost 4.7% against the US dollar in the quarter. Moderating these gains in international assets was the impact of the dollar's appreciation against the Euro (+3.3%), the Japanese yen (+3.1%) and the British pound (+0.6%).

International liabilities decrease, reflecting weaker Canadian stock prices

Canada's international liabilities decreased $14.9 billion to $3,105.9 billion in the third quarter. The decline was mainly the result of lower holdings of Canadian equities by foreign investors as a result of a weaker Canadian stock market. This change was moderated by the effect of the depreciation of the Canadian dollar on US dollar denominated liabilities, combined with foreign investment of $34.4 billion in Canada in the third quarter.

Net foreign asset position on direct investment expands

Direct investment accounted for the largest proportion of the change in Canada's international investment position in the third quarter. The net direct investment asset position was up $61.9 billion to $163.5 billion.

Foreign direct investment in Canada decreased by $60.8 billion to $1,095.2 billion. The first such decline since the second quarter of 2013 reflected downward revaluations as a result of lower Canadian equity prices. Foreign direct investment flows in the quarter moderated the overall decline.

At the same time, Canadian direct investment abroad was largely unchanged at $1,258.7 billion, following increases in the last eight quarters.

Chart 2  Chart 2: Direct investment position - Description and data table
Direct investment position

Chart 2: Direct investment position - Description and data table

Net foreign liability on portfolio investment decreases

Canadian holdings of foreign securities advanced $60.8 billion to $1,273.1 billion in the third quarter. This increase was mainly the result of a pickup in Canadian investors' acquisitions of foreign securities as well as the effect of a relatively stronger US dollar.

Foreign investors' holdings of Canadian securities were up $32.0 billion to $1,490.2 billion. This increase was composed of foreign acquisitions of Canadian securities, mainly from the corporate sector, as well as the upward revaluation effect of the depreciation of the Canadian dollar on Canada's holdings of US dollar denominated debt securities. A decline in Canadian stock prices moderated the increase in the quarter. The overall result was a lower net debt position on international investment in securities.

Chart 3  Chart 3: Portfolio investment position - Description and data table
Portfolio investment position

Chart 3: Portfolio investment position - Description and data table

  Note to readers

The main measure of the International Investment Position Account now incorporates market valuation for tradeable securities and foreign direct investment equity. This adds a further dimension to the analysis of Canada's net international investment position and more accurately reflects changes in that position. The international investment position at book value is still available, as the annual foreign direct investment release includes geographical and industry details. For more information, see Valuation of assets and liabilities.

Currency valuation

The value of assets and liabilities denominated in foreign currency is converted to Canadian dollars at the end of each period for which a balance sheet is calculated. Most of Canada's foreign assets are denominated in foreign currencies while less than half of Canada's international liabilities are in foreign currencies. When the Canadian dollar is appreciating in value, the restatement of the value of these assets and liabilities in Canadian dollars lowers the recorded value. The opposite is true when the Canadian dollar is depreciating.

Change to annual revision practices

The Canadian System of macroeconomic accounts is implementing a new revision policy. Annual revisions for Canada's international investment position, which affect the three most recent calendar years, will take place in December rather than June, as was previously the practice. For more information, see Latest Developments in the Canadian Economic Accounts (Catalogue number13-605-X).

Definitions

The international investment position presents the value and composition of Canada's assets and liabilities to the rest of the world.

Canada's net international investment position is the difference between Canada's assets and liabilities to the rest of the world.

The excess of international liabilities over assets can be referred to as Canada's net foreign debt.

The excess of international assets over liabilities can be referred to as Canada's net foreign assets.

Contact information

For more information, contact us (toll-free 1-800-263-1136; 514-283-8300; infostats@statcan.gc.ca).

To enquire about the concepts, methods or data quality of this release, contact Marie-Josée Lamontagne (613-951-5179; marie-josee.lamontagne@statcan.gc.ca), International Accounts and Trade Division.

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