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Canada's international investment position

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Second quarter 2010 (Previous release)

Canada's net foreign debt edged up $1.8 billion to $199.3 billion at the end of the second quarter, as international liabilities and assets both advanced at about the same rate. This reflected the continued strong inflow of funds from abroad and the depreciation of the Canadian dollar. Net foreign debt has increased over the past six quarters to reach 12.4% of Canada's gross domestic product in the second quarter. Nevertheless, it remains well below the 40% range of the mid-1990s.

International assets continue to be affected by changes in the value of the Canadian dollar

Canada's international assets increased 2.8% to $1,433.6 billion in the second quarter. This followed four consecutive quarters of decline in international assets, which was primarily a result of the effect of an appreciating Canadian dollar on these foreign currency-denominated holdings. The Canadian dollar depreciated against most foreign currencies in the second quarter, down 4.6% against the US dollar, 8.7% against the Japanese yen, and 4.5% against the British pound. The resulting upward revaluation effect on the value of Canadian foreign currency denominated assets was $37.0 billion.

International liabilities reflect sustained strong foreign investment in Canadian securities

International liabilities increased 2.5% to $1,633.0 billion, as non-resident investors placed a further $27.3 billion in Canada during the quarter. This activity helped finance the current account deficit in the quarter and was concentrated in foreign acquisitions of Canadian bonds. The depreciation of the Canadian dollar added to the increase with a $21.8 billion upward revaluation of foreign currency denominated liabilities.

Canada's international investment position

Note to readers

The international investment position presents the value and composition of Canada's foreign assets and liabilities to the rest of the world. Canada's net international investment position is the difference between these foreign assets and liabilities. The excess of international liabilities over assets can be referred to as Canada's net foreign debt. The excess of international assets over liabilities can be referred to as Canada's net foreign assets. The valuation of the assets and liabilities in the international investment position are measured at book value, unless otherwise stated. Book value represents the value of assets and liabilities recorded in the books of the enterprise in which the investment is made.

Currency valuation

The value of assets and liabilities denominated in foreign currency are converted to Canadian dollars at the end of each period for which a balance sheet is calculated. Most of Canada's foreign assets are denominated in foreign currencies while less than half of our international liabilities are in foreign currencies. When the Canadian dollar is appreciating in value, the restatement of the value of these assets and liabilities in Canadian dollars lowers the recorded value. The opposite is true when the dollar is depreciating.

Direct investment assets rise by more than liabilities

Inward and outward direct investment flows were largely offsetting in the second quarter, but Canadian direct investment abroad increased by more than foreign direct investment in Canada. This reflected a $16.4 billion upward revaluation effect due to the depreciating Canadian dollar boosting the value of direct investment assets abroad. As a result, Canada's net asset position on direct investment advanced over the second quarter.

Direct investment position

Strong investment in Canadian bonds leads increase in liabilities

Non-resident holdings of Canadian securities were up strongly in the second quarter, which mainly reflected foreign investment of $40.7 billion, including high purchases of federal bonds ($19.4 billion). In addition, there was an $11.5 billion increase in foreign currency denominated liabilities as a result of the depreciation of the Canadian dollar.

The change in Canadian investors' holdings of foreign securities was largely due to the upward revaluation effect of the depreciation of the Canadian dollar on these assets.

Weak global markets also contribute to the rise in net foreign debt

Canada's overall net international investment position can also be calculated with tradable securities valued at market prices. By this measure, Canada's net foreign debt rose by $38.3 billion to $208.7 billion by the end of the second quarter. This mainly reflected equity market declines, with global markets faring worse than Canadian markets. These fluctuations removed 11.3% from the value of foreign stocks held by Canadians and 6.2% from the value of Canadian corporate shares held by non-residents.

Available on CANSIM: tables 376-0055 to 376-0057 and 376-0059.

Definitions, data sources and methods: survey numbers, including related surveys, 1534 and 1537.

The second quarter 2010 issue of Canada's International Investment Position (67-202-X, free) will be available soon.

For more information, contact Client Services (613-951-1855; To enquire about the concepts, methods or data quality of this release, contact Christian Lajule (613-951-2062) or Komal Bobal (613-951-6645), Balance of Payments Division.

Table 1

Canada's international investment position at period end
  Fourth quarter 2006 Fourth quarter 2007 Fourth quarter 2008 Fourth quarter 2009 First quarter 2010 Second quarter 2010
  $ billions
Canadian direct investment abroad 518.8 513.1 641.6 593.3 563.8 588.4
Portfolio investment abroad            
Foreign bonds 124.0 150.3 145.7 123.9 118.0 118.4
Foreign bonds at market value 133.7 153.5 143.2 124.1 117.8 120.0
Foreign stocks 227.4 226.4 279.2 255.6 249.4 259.5
Foreign stocks at market value 582.2 603.2 438.9 508.3 511.5 472.4
Foreign money market 20.0 7.5 3.5 4.6 5.6 5.1
Foreign money market at market value 20.1 7.5 3.5 4.6 5.6 5.1
Other investments            
Loans 72.8 77.8 94.5 103.2 114.7 109.0
Deposits 132.2 157.9 225.4 223.0 230.4 235.8
Official international reserves 41.0 40.6 51.4 56.0 56.2 56.6
Official international reserves at market value 40.9 40.7 53.4 57.1 57.6 59.0
Other assets 45.5 38.2 52.6 54.9 57.0 60.9
Total assets            
At book value 1,181.7 1,211.9 1,494.0 1,414.5 1,395.2 1,433.6
With portfolio investment at market value 1,546.2 1,592.0 1,653.2 1,668.5 1,658.5 1,650.5
Foreign direct investment in Canada 437.2 510.1 540.8 549.4 561.0 570.1
Portfolio investment            
Canadian bonds 410.0 384.7 455.1 495.7 501.2 543.2
Canadian bonds at market value 432.5 399.7 470.4 525.9 529.0 577.2
Canadian stocks 96.7 92.1 96.1 112.8 112.5 116.7
Canadian stocks at market value 317.9 360.0 218.3 313.7 321.1 309.2
Canadian money market 24.5 22.0 34.9 32.9 32.3 33.4
Canadian money market at market value 24.7 22.2 35.0 32.9 32.3 33.4
Other investment            
Loans 55.7 61.8 71.7 61.9 68.3 68.9
Deposits 226.8 243.5 301.6 282.5 284.9 268.1
Other liabilities 21.7 27.4 24.5 32.6 32.4 32.5
Total liabilities            
At book value 1,272.6 1,341.7 1,524.8 1,567.7 1,592.7 1,633.0
With portfolio investment at market value 1,516.5 1,624.8 1,662.4 1,798.9 1,829.0 1,859.3
Net international investment position            
At book value -90.9 -129.8 -30.8 -153.2 -197.5 -199.3
With portfolio investment at market value 29.7 -32.9 -9.2 -130.4 -170.4 -208.7