Canada's international transactions in securities

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For the first time since November 2007, non-residents reduced their holdings of Canadian securities in July ($5.6 billion). While foreign investors divested themselves of equities and bonds, they added short-term instruments to their portfolios for the fourth consecutive month.

At the same time, Canadian investors resumed acquisitions of foreign securities in July ($1.2 billion). This investment was concentrated in equities, as they further reduced their holdings of long-term debt instruments.

Bond retirements exceed non-resident acquisitions of Canadian debt instruments

Non-resident investors' bond holdings were reduced ($3.7 billion) in July, following significant investment over the second quarter. July's divestment was due to sizeable retirements of Canadian bonds, mainly those denominated in non-US foreign currencies. Nevertheless, non-resident investors were active in the acquisition of Canadian bonds on secondary markets for a seventh consecutive month. This investment moderated the effect of the retirements.

Foreign investors' demand for Canadian money market instruments strengthened moderately in July. Acquisitions were dominated by purchases of federal government bills, almost equally split between Canadian and US dollar-denominated instruments. However, this activity was partly offset by disposals of federal government enterprise and provincial government short-term paper.

Non-residents record their first divestment of Canadian stocks since January 2008

Non-residents sold Canadian stocks in July ($2.7 billion), ending five months of consecutive investment averaging $2.5 billion per month. Foreign divestment was mainly in energy and mining, banking, and technology sectors. In July, the Standard and Poor's / Toronto Stock Exchange index fell 6.0%, led by losses in the energy and mining sectors as commodity prices declined for the first time in 2008.

Canadians reduce holdings of foreign bonds but accumulate foreign shares

Canadian investors continued to avoid foreign bonds in July. Close to 60% of the divestment was in non-US foreign bonds, mainly due to retirements of maple bonds. Since January 2008, residents have reduced their holdings of non-US foreign bonds by a total of $2.5 billion. Meanwhile, Canadian holdings of foreign money market instruments edged up in July, as purchases of US Treasury bills more than offset sales of other foreign paper.

In July, resident investors resumed acquisitions of foreign stocks ($2.5 billion), led by demand in the Canadian pension fund sector. US shares accounted for 80% of July's investment. This coincided with US stock price decreases of 8.6% in June and 1.0% in July.

Canadians have steadily accumulated foreign shares since October 2006, with the exception of January and June 2008, when major foreign equity indexes experienced sharp declines.

Available on CANSIM: tables 376-0018 to 376-0029, 376-0042, 376-0058 and 376-0063.

Definitions, data sources and methods: survey number 1535.

The July 2008 issue of Canada's International Transactions in Securities (67-002-XWE, free) will soon be available.

Data on Canada's international transactions in securities for August will be released on October 20.

For more information, or to order data, contact Client Services (613-951-1855; infobalance@statcan.gc.ca). To enquire about the concepts, methods or data quality of this release, contact Yiling Zhang (613-951-2057), Balance of Payments Division.

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