International investment position

First quarter 2004

The increase in the value of Canadian assets abroad drove the country's net liability to foreign residents to its lowest level in more than 18 years during the first quarter of 2004.

Canada's net foreign liabilities — the difference between its foreign assets and foreign liabilities — dropped $23.7 billion to $194.2 billion at the end of March.

Canada's international investment position

This left the ratio of net foreign liabilities to gross domestic product at 15.5%, down two full points from the 17.7% posted at the end of the fourth quarter of 2003.

The value of international assets totalled $931.5 billion, up 2.5% from the fourth quarter. For a second consecutive quarter, Canadian direct investment abroad rose more than $10 billion and contributed about half of this increase.

Note to readers

International liabilities fell slightly from the previous quarter to $1,125.8 billion; this was short of the revised $1,177.3 billion posted at the end of 2002.

The Canadian dollar lost ground against the US dollar in the first quarter of 2004, in sharp contrast to the trend in 2003. In the first quarter of 2004, the loonie lost about 1% against the US dollar but gained almost 1% again the Euro.

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Rising Canadian assets abroad

Canadian direct investment abroad reached $409.3 billion at the end of March, up $10.1 billion from the end of December, the highest value in more than a year. Exchange rate variation, combined with investment of $4.8 billion in the first quarter, accounted for most of this increase.

Canadian direct investment in the United States rose to $168.8 billion, representing more than 41% of total Canadian direct investment abroad.

Canadian holdings of foreign bonds surged almost 7% to $47.7 billion, the highest value on record. Canadians bought $2.6 billion worth of foreign bonds during the first quarter — an active quarter for this type of instrument.

Net international investment position, by geographic area

Canadian holdings of foreign stocks reached $191.2 billion, up $2.4 billion from the end of December. Exchange rate variation is responsible for almost all the change in the value; virtually no net acquisitions of foreign stocks took place in the first quarter.

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Foreign direct investment in Canada on the rise

After two consecutive quarters of small declines, foreign direct investment in Canada advanced $2.4 billion to $360.0 billion at the end of March, an unprecedented level.

The net direct investment position — the difference between Canadian direct investment abroad and foreign direct investment in Canada — reached $49.3 billion at the end of the quarter.

Sharp decline in foreign holdings of Canadian money market paper

Foreign holdings of Canadian money market paper fell more than 12% to $18.7 billion, the lowest level in 17 years. While foreign demand for short-term instruments was down, foreign holdings of Canadian bonds rose $6.3 billion to $411.7 billion. Of that total, foreign holdings of federal government enterprise bonds increased more than 10% to $40.6 billion.

Foreign investors continued to buy Canadian shares during the first quarter. At the end of March, they held $86.2 billion worth, a fourth consecutive quarter of growth for this type of investment. The gain in the S&P/TSX Composite Index for a fourth consecutive quarter certainly played a role in foreign investors' acquisition of Canadian shares.

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Canada's net foreign liabilities with the United States increase

American investors hold a growing proportion of Canada's net foreign liabilities; this has been a long-term trend. For a third consecutive year, Canada's net foreign liabilities with the United States advanced, reaching $271.0 billion at the end of 2003.

European Union countries decreased their net creditor position with Canada to $57.8 billion at the end of 2003. Canada has a net asset position with all other countries as a group.

New data available on market value of portfolio investment

The market value of foreign portfolio investment in Canadian stocks and bonds at the end of March 2004 was triple what it was 14 years before. Foreign holdings of Canadian stocks and bonds grew from $209.3 billion in March 1990 to $629.3 billion in March 2004.

Portfolio investment in stocks at market value

Canadian portfolio investment in foreign stocks and bonds grew nine-fold in those 14 years. Canadian-held foreign stocks and bonds were valued at $400.8 billion at the end of March 2004, compared with $44.0 billion in March 1990.

On the stocks side, foreign investors saw their holdings of Canadian shares grow from $38.1 billion to $175.9 billion in 14 years. That value peaked at $274.1 billion in September 2000, when the S&P/TSX Composite Index was at a historic high.

The market value of foreign stocks held by Canadians appreciated even more, from $34.8 billion in March 1990 to $348.7 billion in March 2004. In 1999 alone this value jumped 42%, as foreign markets were very strong. Despite declines in global financial markets from 2000 to 2002, Canadian investors' holdings of foreign stocks remained high, mostly because of large purchases of foreign stocks and higher foreign content limits for Registered Retirement Savings Plans.

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Statistical table

• International investment position at period-end

Information on methods and data quality available in the Integrated Meta Data Base: 1537.