Canada's international transactions in securities

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Canadian investors reduced their overall holdings of foreign securities by $665 million in September, due to further sales of foreign bonds. The divestment in foreign bonds exceeded the investment in foreign money market instruments and equities.

Non-resident investors followed a similar investment pattern and reduced their holdings of Canadian securities by $267 million, with a large divestment in Canadian bonds. This reduction occurred in spite of significant acquisitions of Canadian money market instruments and equities over the month.

Canadians invest in foreign short-term paper

Canadians shied away from foreign bonds again in September, but partly compensated by a $552 million purchase of foreign money market instruments, with interest rates in decline. In September, US short-term rates reached their lowest level since May 2004.

The acquisition of foreign money market instruments in September was driven by US treasury bills. However, Canadians further disposed of foreign corporate paper issued by both financial and non-financial corporations.

In September, Canadian holdings of foreign bonds decreased a further $2.8 billion. The divestment was entirely in US government bonds and was the largest in 10 months. On the other hand, there was investment in non-US foreign bonds, as purchases of maple bonds resumed moderately.

Canadian investors' acquisitions of US stocks remain strong

For three months in a row, Canadians have made robust investments in foreign stocks during a period of declining prices and escalating volatility on global stock markets. The $1.6 billion acquisition of foreign shares was comprised of a well-diversified basket of US stocks.

Non-residents buy Canadian money market paper and sell Canadian bonds

September's foreign investment in Canadian debt instruments was focused on short-term paper, with non-residents adding $1.0 billion worth to their portfolios as interest rates continued to slide. In September, Canadian short-term interest rates retreated to their lowest level in six months. Nevertheless, the resulting rate differential still favoured investment in Canada.

Purchases of paper issued by the Canadian federal government and its enterprises, mainly US dollar-denominated paper, dominated September's foreign investment. September's foreign activity in Canadian money markets brought the total investment flows in these instruments to $4.7 billion since April 2008.

On the other hand, non-residents disposed of $3.8 billion of Canadian bonds over the month. September marked the first foreign sell-off of Canadian bonds on secondary markets in 2008, with a sizeable amount of this activity comprised of bonds issued by the federal government and its enterprises. On a currency basis, however, foreign investors sold $3.9 billion of bonds denominated in Canadian dollars while they added $1.8 billion of bonds denominated in US dollars.

Despite the turnaround in September, foreign investment in Canadian bonds has amounted to $25.6 billion since January 2008, compared with an investment of $6.3 billion over the same period in 2007.

Foreign investment in Canadian shares resumes

Foreign investors acquired $2.5 billion of Canadian stocks in September, as Canadian stock prices experienced the largest monthly decline in over a decade. Non-residents added shares of banking and other financial firms while selling equities of the energy, mining and technology sectors. September's activity followed two months of large foreign sales totalling $7.8 billion.

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 September 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 October will be released on December 18.

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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