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International investment position
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First quarter 2009
International investment position note to readers
Canada recorded a $10.1 billion net foreign asset position in the first quarter of 2009. As in the fourth quarter of 2008, the revaluation of foreign assets owing to the depreciation of the Canadian dollar more than offset the impact of a current account deficit.
International assets rise at a faster pace than international liabilities
International assets rose 3.1% during the quarter to reach $1,532.8 billion, while international liabilities increased 2.9% to $1,522.7 billion. Non-residents invested $31.9 billion during the quarter, concentrated in Canadian marketable debt liabilities. For their part, Canadian investors added $16.3 billion to their foreign assets holdings. The net effect of currency fluctuations resulted in an additional increase of $13.1 billion to the net foreign asset position.
Chart G.1 Canada’s international investment position
Differential exchange rate effects moderate the impact on Canada’s net international investment position
Volatility in the value of the Canadian dollar relative to foreign currencies continued in the first quarter of 2009, with the Canadian dollar appreciating against some major foreign currencies while depreciating against others. This was in contrast to fluctuations in the fourth quarter of 2008 where the Canadian dollar depreciated against most major currencies.
In the first quarter, the Canadian dollar depreciated 3.4% against the U.S. dollar, and 1.9% against the British pound. However, it appreciated 5.3% against the Japanese yen, and 1.4% against the euro, moderating the impact on Canada’s net international investment position in the quarter. Nevertheless, since more than half of Canada’s international assets are denominated in U.S. dollars, the overall contribution of currency fluctuations resulted in an increase in foreign assets, specifically $28.2 billion for those assets denominated in U.S. dollars.
Canadian direct investment abroad again accounts for the largest increase in foreign assets
Canada’s net asset position on direct investment increased further, reaching $151.9 billion at the end of the first quarter. The value of Canadian direct investment abroad was up $19.6 billion (+3.1%), with the bulk of the increase due to the revaluation effect of the depreciation of the Canadian dollar relative to the U.S. dollar and most of the balance accounted for by sustained direct investment abroad. Foreign direct investment flows in Canada were stagnant during the first quarter, such that the net foreign direct investment position continued to advance.
Chart G.2 Direct investment position
Increase in non-residents holdings of Canadian portfolio liabilities exceeds that of Canadian holdings of foreign securities
Non-residents returned to Canadian bond and equity investments while continuing to increase their positions in Canadian money market instruments during the first quarter of 2009 for a total inflow to Canada of $23.3 billion. The revaluation effect of the drop in the Canadian dollar added $7.5 billion to the value of Canadian bond liabilities denominated in foreign currencies.
Canadian investors increased their foreign portfolio assets by $13.4 billion in the quarter, mainly in equity, following substantial divestment in the fourth quarter of 2008. Canadian portfolio investment abroad was boosted by another $5.5 billion in the first quarter, due to the drop in the Canadian dollar. However, the net foreign portfolio investment position continued to decrease ($-11.5 billion) in the quarter.
Losses on the market value of Canadian portfolio foreign equity investments decrease net foreign asset position
Canada’s overall net international investment position can also be calculated with portfolio assets and liabilities of tradable securities valued at market prices. By this measure, Canada’s net foreign asset position decreased to $37.0 billion in the first quarter of 2009. This reflected the continued decline of global equity markets, in which Canadian markets fared better than many international markets. As a result, Canadian stocks held by non-residents decreased much less ($-7.2 billion) than foreign equities held by Canadians ($-43.9 billion).
Statistical table
