Canada's international transactions in securities, March 2019

Released: 2019-05-16

Foreign investors reduced their holdings of Canadian securities by $1.5 billion in March, the first divestment in three months. Meanwhile, Canadian investment in foreign securities totalled $1.5 billion, led by purchases of US corporate bonds.

As a result, international transactions in securities generated a net outflow of funds of $3.0 billion from the Canadian economy in March. For the first quarter, a net inflow of funds in the economy of $40.8 billion was recorded, led by strong foreign investment in Canadian securities in January.

Chart 1 
Canada's international transactions in securities, quarterly

Foreign investors reduce their holdings of Canadian money market instruments and shares

Foreign investors reduced their holdings of Canadian securities by $1.5 billion in March, following significant acquisitions in the first two months of the year. Foreign investors reduced their exposure to Canadian money market instruments and shares, but acquired Canadian bonds in the month. For the first quarter, foreign purchases of Canadian securities totalled $39.9 billion, the largest investment since the fourth quarter of 2017.

Chart 2 
Foreign investment in Canadian securities

Non-resident investors purchased $4.8 billion of Canadian bonds in March. The activity in the month reflected strong foreign acquisitions of corporate bonds moderated by a divestment in government instruments. New issues of Canadian private corporate bonds denominated in US dollars led the investment activity. New issue activity of this sector resumed in February and March following net retirements in the previous months. The divestment in government bonds was mainly in federal government bonds. Canadian long-term interest rates were down by 37 basis points and the Canadian dollar depreciated against its US counterpart by 1.1 US cents in March.

Foreign investors reduced their holdings of Canadian money market instruments by $5.4 billion in March, the second consecutive monthly decline. A divestment in provincial government paper accounted for the bulk of the reduction in the month.

Non-resident investors reduced their exposure to Canadian equities by $843 million in March, the first divestment since May 2018. This divestment mainly resulted from sales of shares from the finance and insurance industry. This divestment also contrasted with the investment activity of the first two months of the year. In the first quarter, foreign investors increased their holdings of Canadian shares by $15.0 billion, the largest quarterly investment in two years. Issuances of new Canadian shares resulting from cross-border mergers and acquisitions accounted for the bulk of the activity. Canadian stock prices were up by 0.6% in March and by 12.4% in the quarter.

Canadian investors purchase foreign bonds and sell US equities

Canadian investors added $1.5 billion of foreign securities to their portfolio in March. Investors targeted foreign bond markets in the month. For the first quarter, the significant divestment in January more than offset the total investment recorded in February and March, resulting in the first quarterly divestment in foreign securities in three years.

Canadian investment in foreign debt securities was $3.5 billion in March, the third consecutive monthly investment in these instruments. The activity was led by acquisitions of foreign bonds, as investors added both US and non-US foreign bonds to their holdings. In March, US long-term interest rates were down by 11 basis points but exceeded Canadian rates by more than one percentage point.

Canadian investors reduced their holdings of foreign equities by $1.9 billion in March. Sales of US shares were moderated by purchases of non-US shares. This was the fifth straight month of divestments in US shares. Canadian investors have reduced their holdings of US equities by $20.2 billion during that period. Meanwhile, their overall exposure to US debt securities increased by $5.6 billion.

Chart 3 
Canadian investment in foreign securities

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To enquire about the concepts, methods or data quality of this release, contact Éric Simard (613-219-5932; eric.simard@canada.ca), International Accounts and Trade Division.