Canada's international investment position, second quarter 2012
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Canada's net foreign debt increased $23.4 billion to $241.6 billion at the end of the second quarter. This resulted mainly from the impact of weaker stock markets on the relatively larger equity component in Canadian outward investment positions, as well as further foreign investment in the economy in the quarter.
Canada's international investment position
Weakened foreign stock markets pull international assets down
Canada's international assets at market value declined $59.9 billion to $2,220.4 billion. Canadian investment flows abroad of $5.5 billion in the quarter were more than offset by an $85.7 billion downward revaluation, mainly due to lower stock markets. The net effect of movements in the exchange rates moderated the decrease in the value of foreign currency denominated international assets by $20.3 billion. The Canadian dollar lost 2.0% against the US dollar and 5.3% against the Japanese yen. It gained 0.1% against the British pound and 3.3% against the Euro.
International liabilities decline despite continued investment from abroad
Canada's international liabilities were down $36.5 billion to $2,462.0 billion in the second quarter. Non-residents invested $16.6 billion in the Canadian economy in the quarter, with $18.0 billion in Canadian bonds, which was partly offset by withdrawals of deposits. Exchange rate movements also added $9.9 billion to international liabilities denominated in foreign currencies. However, lower prices on Canadian stock markets had a much larger impact, pulling down the value of non-resident holdings of Canadian equities by $67.8 billion.
Canada's net asset position on direct investment at market value narrows
The $25.6 billion decline in the second quarter in the net direct investment position was led by Canadian assets. Canadian direct investment abroad declined to $915.8 billion in the second quarter. This reflected the lower prices on international stock markets, which removed $66.5 billion from the value of direct investment assets. Declines were moderated by the revaluation effect of a depreciation of the Canadian dollar on foreign currency denominated assets abroad as well as by investment outflows in the quarter, which together added $11.6 billion to the asset position.
Canada's direct investment position
On the other side of the ledger, the value of foreign direct investment in Canada was down $29.4 billion in the second quarter to $890.4 billion, as Canadian equity markets fell. Direct investment inflows moderated the loss in value, by adding $10.4 billion to the liability position.
Net liability position on securities expands further
Canada's net liability on portfolio investment was up in the second quarter. Non-resident holdings of Canadian securities increased $11.8 billion in the second quarter to $1,194.7 billion. Foreign investors acquired $28.5 billion of Canadian securities, mostly in Canadian bonds and money market instruments, but lower prices on the Canadian equity markets removed $28.1 billion from the value of their holdings of Canadian equities.
Canada's international portfolio investment position
At the same time, the value of Canadian holdings of foreign securities declined by $15.4 billion to $790.1 billion. Lower prices on foreign stock markets more than compensated for the impact of exchange rate changes which added $8.1 billion to the position.
Note to readers
The comprehensive historical revision to the International Investment Position (IIP) is released with this issue of the quarterly International Investment Position. For more information please see Historical revisions of the System of National Accounts. With this release, the main measure of the IIP accounts now incorporates market valuation for tradeable securities and foreign direct investment equity. This new presentation adds a further dimension to the analysis of Canada's net international investment position and more accurately reflects changes in that position. The IIP at book value is still available, which is linked to the annual foreign direct investment release and includes geographical and industry details compiled at book value. For more information, please see Valuation of assets and liabilities.
The international investment position presents the value and composition of Canada's 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 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 Canada's 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 Canadian dollar is depreciating.
For more information, contact Statistics Canada's National Contact Centre (toll-free 1-800-263-1136; 613-951-8116; email@example.com).
To enquire about the concepts, methods or data quality of this release, contact Komal Bobal (613-951-6645) or Marie-Josée Lamontagne (613-951-5179), Balance of Payments Division.
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