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Canada's international transactions in securities, August 2017

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Released: 2017-10-16

Foreign investment in Canadian securities totalled $9.8 billion in August, down from $24.0 billion in July. At the same time, Canadian investors increased their holdings of foreign securities by $12.0 billion, led by purchases of US corporate instruments.

As a result, international transactions in securities generated a net outflow of funds of $2.2 billion from the Canadian economy in the month.

Foreign investment in Canadian securities slows

Foreign acquisitions of Canadian securities totalled $9.8 billion in August, below the monthly average investment of $17.7 billion observed from January to July. The activity in August was concentrated in the Canadian debt market.

Chart 1  Chart 1: Foreign investment in Canadian securities
Foreign investment in Canadian securities

Foreign investment in Canadian bonds amounted to $8.2 billion in August, mainly secondary market purchases of government instruments denominated in Canadian dollars. This followed an investment of $23.8 billion in July. Foreign investors acquired $4.3 billion of federal government bonds and $1.8 billion of provincial government bonds in August. Foreign investors also added private corporate bonds to their holdings in the month, but at a much slower pace than in the previous two months. Canadian long-term interest rates were down by 12 basis points in August following a significant increase in July.

Non-resident investors resumed their acquisitions of Canadian money market instruments by adding $1.5 billion to their holdings in August, following two straight months of divestment. Foreign acquisitions of corporate and provincial government paper were moderated by a divestment in Canadian Treasury bills during the month. Canadian short-term interest rates edged down and the Canadian dollar depreciated slightly against its US counterpart in the month.

Foreign investment in Canadian equities totalled $232 million in August, down from the previous month. This was the fourth consecutive month of foreign acquisitions of Canadian shares. Canadian stock prices edged up in the month.

Canadian investors buy US securities

Canadian investors resumed their acquisitions of foreign securities by adding $12.0 billion to their holdings in August, led by purchases of US corporate instruments. This followed a divestment of $1.8 billion in July.

Chart 2  Chart 2: Canadian investment in foreign securities
Canadian investment in foreign securities

Canadian investment in foreign bonds increased in August to reach $4.9 billion, the highest investment since February 2016. The bulk of the activity in August was in US corporate bonds. Acquisitions of US Treasury bonds and non-US foreign bonds also contributed to the increase. US long-term interest rates were down by 11 basis points in the month.

Canadian investment in foreign equities rebounded to reach $7.2 billion in August, after a $2.9 billion divestment in July. The increase was largely due to acquisitions of US shares. US stock prices edged up in the month.

Telling Canada's story in numbers; #ByTheNumbers

In celebration of the country's 150th birthday, Statistics Canada is presenting snapshots from our rich statistical history.

Data on Canada's international transactions in securities have been available on a monthly basis since January 1988. Different patterns in the data were observed over these three decades.

First, foreign investment in Canadian securities exceeded Canadian investment in foreign securities from 1988 to 1997, led by foreign acquisitions of Canadian government debt securities.

From 1998 to 2007, Canadian investment in foreign securities was double the foreign investment in Canadian securities. This reflected an increase in access to international financial markets for Canadians as well as the elimination of the Foreign Property Rule in the Income Tax Act that capped investments outside Canada in tax-deferred retirement plans prior to 2005.

Following the global financial crisis, cross-border transactions in securities have grown substantially and foreign investment in Canadian securities has considerably outpaced Canadian investment in foreign securities. Strong foreign investments in federal government bonds in the years following the financial crisis and then in Canadian corporate instruments contributed to this growth. These investments were the main contributor to the financing of the current account deficit over this period.

Chart 3  Chart 3: Canada's international transactions in securities, 1988 to 2016
Canada's international transactions in securities, 1988 to 2016


  Note to readers

The data series on international transactions in securities covers portfolio transactions in equity and investment fund shares, bonds and money market instruments for both Canadian and foreign issues. This activity excludes transactions in equity and debt instruments between affiliated enterprises, which are classified as foreign direct investment in the international accounts.

Equity and investment fund shares include common and preferred equities as well as units/shares of investment funds.

Debt securities include bonds and money market instruments.

Bonds have an original term to maturity of more than one year.

Money market instruments have an original term to maturity of one year or less.

Government of Canada paper includes Treasury bills and US-dollar Canada bills.

All values in this release are net transactions unless otherwise stated.

Next release

Data on Canada's international transactions in securities for September will be released on November 16.

Products

The Methodological Guide: Canadian System of Macroeconomic Accounts (Catalogue number13-607-X) is available.

The User Guide: Canadian System of Macroeconomic Accounts (Catalogue number13-606-G) is also available. This publication will be regularly updated to maintain its relevance.

The updated Canada and the World Statistics Hub – United States (Catalogue number13-609-X) is now available from the home page of our website. This new product illustrates the nature and extent of Canada's economic and financial relationship with the United States, using interactive graphs and tables. This product provides easy access to information on trade, investment, employment and travel, including merchandise trade by Canadian provinces and US states.

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 Jamie Burns (613-302-4989; jamie.burns@canada.ca), International Accounts and Trade Division.

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