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Canada's international investment position, third quarter 2015

Released: 2015-12-11

Canada's net international investment position

$287.9 billion

Third quarter 2015

Canada's net foreign asset position increased $61.0 billion in the third quarter to reach $287.9 billion. The growth largely reflected the impact of a weaker Canadian dollar, which increased the value of Canada's international assets more than it raised the value of its liabilities.

Foreign assets held by Canadians are mostly denominated in foreign currencies, while less than half of international liabilities are in foreign currencies. Over the quarter, the Canadian dollar lost 6.4% against the US dollar, 6.6% against the euro, 2.8% against the British pound and 8.3% against the Japanese yen.

Lower global equity prices had a moderating effect on the gains in the net foreign asset position in the quarter. The decline in equity prices had a greater impact on the value of Canada's international assets than on its liabilities. Two-thirds of international assets are in the form of equities compared with about 40% of international liabilities.

The Standard and Poor's / Toronto Stock Exchange composite index lost 8.6% and the Standard and Poor's 500 index fell 6.9%, while most other major foreign stock markets were also down. About half of Canada's international assets are held in the United States.

Chart 1  Chart 1: Contributors to the quarterly change in the net international investment position
Contributors to the quarterly change in the net international investment position

This was the fifth consecutive quarter of positive change in the net international investment position, despite ongoing balance of payments current account deficits. The gains during this period mainly reflected a lower net foreign debt position with the United States, down from $400.4 billion in June 2014 to $59.4 billion at the end of September 2015.

Chart 2  Chart 2: Canada's international investment position
Canada's international investment position

Canada's net international investment position advances on lower international liabilities

Canada's international liabilities were down $48.8 billion to $3,452.4 billion in the third quarter. The decrease mainly reflected a decline in Canadian stock prices, which more than offset both the upward revaluation effect of a weaker Canadian dollar on these liabilities and foreign acquisitions in Canada of $35.5 billion.

Canada's international assets edged up $12.2 billion to $3,740.3 billion. This reflected acquisitions of foreign assets of $26.7 billion as well as the upward revaluation effect of the depreciation of the Canadian dollar on international assets, which was largely offset by a decline in equity prices on most foreign stock markets.

Direct investment assets and liabilities down on lower equity prices

Direct investment assets decreased by $26.0 billion to $1,474.9 billion over the third quarter. A decline in global equity prices more than offset gains due to strong outflows, led by cross-border mergers and acquisitions, and the impact of a lower Canadian dollar against most major currencies.

Direct investment liabilities recorded a larger decline, down $65.0 billion to reach $1,129.1 billion. Again, strong inflows—mostly from mergers and acquisitions activity—were more than offset by weakening Canadian equity prices.

As a result, the net direct asset position advanced $39.0 billion to $345.8 billion as assets declined less than liabilities on a lower Canadian dollar.

Chart 3  Chart 3: Direct investment position
Direct investment position

Net foreign liability position on portfolio investment narrows

Canada's net foreign liability position on portfolio investment was down $20.3 billion to $114.4 billion in the third quarter. While portfolio assets were down, they fell less than portfolio liabilities.

The $2.1 billion decrease in Canadian holdings of foreign securities reflected the general decline in foreign stock prices, which was largely offset by the upward revaluation effect of a weaker Canadian dollar on these assets. On an instrument basis, holdings of foreign equities were down $24.4 billion. The decline in holdings of non-US foreign instruments, notably from Japan and China, more than offset the growth in holdings of US instruments. On the other hand, debt securities advanced $22.3 billion, nearly all US instruments.

Foreign holdings of Canadian securities were down $22.4 billion to $1,637.1 billion. Canadian stocks held by non-residents declined by $55.3 billion to $480.3 billion, a level last seen at the end of 2013. This reduction was largely due to unrealized stock market capital losses. A $33.8 billion increase in non-residents holdings of Canadian bonds, led by corporate bonds, moderated the overall decrease. Foreign holdings of corporate bonds are more sensitive to currency fluctuations than government bonds. Nearly three-quarters of corporate bonds held by non-residents are denominated in foreign currencies compared with one-third of government bonds.



  Note to readers

Revisions

This release incorporates revisions back to 1981 as part of the 2015 comprehensive revision of the Canadian System of Macroeconomic Accounts (CSMA). Revisions to the international investment position reflect statistical, classification, conceptual and presentational changes. This exercise was conducted to strengthen the overall quality of the international accounts and to introduce new concepts and classifications as recommended by updated international standards.

For more information on revisions applied to the international investment position as part of the 2015 comprehensive revision of the CSMA, see "Revisions to Canada's International Investment Position."

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.

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

Products

The document "Revisions to Canada's International Investment Position," which is part of the publication Latest Developments in the Canadian Economic Accounts (Catalogue number13-605-X), is now available from the Browse by key resource module of our website, under Publications.

Contact information

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

To enquire about the concepts, methods or data quality of this release, contact Marie-Josée Lamontagne (613-790-8463; marie-josee.lamontagne@canada.ca), International Accounts and Trade Division.

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