Canada's international investment position, fourth quarter 2015
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Fourth quarter 2015
Canada's net foreign asset position increased by $206.0 billion in the fourth quarter to $471.9 billion. The fourth quarter closed a year of strong revaluation-led advances in the net international asset position, despite the continued need for Canada to borrow funds from abroad to finance current account deficits.
Over the quarter, other changes, led by higher foreign equity prices and a lower Canadian dollar against most major currencies, contributed to a $213.4 billion increase in the net asset position. This gain was slightly offset by net borrowing from abroad of $7.4 billion in the financial account of the balance of payments.
The change in the net international investment position in the quarter reflected an increase in Canada's international assets of $308.5 billion, on the strength of both portfolio and direct investment equities. International liabilities were up by $102.5 billion, led by higher currency and deposits held by non-residents in Canada and, to a lesser extent, foreign holdings of Canadian bonds.
On a geographical basis, Canada posted a first net asset position with the United States in the fourth quarter. This position has been increasing throughout the year, from a net liability position of $222.3 billion at the end of 2014 to a net asset position of $82.2 billion at the end of 2015.
For 2015 as a whole, Canada's net international investment position was positively affected by the larger decline of the Canadian stock market relative to the US stock market and by the depreciation of the Canadian dollar. The Standard and Poor's / Toronto Stock Exchange composite index lost 11.1% while the Standard and Poor's (500) index lost 1.8% in 2015. Over the same period, the Canadian dollar depreciated 16.2% against the US dollar, 11.4% against the British pound, 15.9% against the Japanese yen and 6.6% against the euro.
Portfolio investment assets exceed liabilities
Canadian holdings of foreign securities were up $160.7 billion to $1,672.2 billion in the fourth quarter. This gain was led by US securities, for which Canadians holdings increased by $110.2 billion to $1,038.1 billion. Most of this increase was related to upward revaluation effects and, to a lesser extent, strong investment activity over the quarter. The growth in portfolio assets in Japan, United Kingdom and China also contributed to the overall increase.
Foreign holdings of Canadian securities advanced but at a much slower pace, up $30.1 billion to $1,669.5 billion. The growth was in Canadian debt securities, mainly foreign currency-denominated bonds held by non-residents. Non-residents' holdings of Canadian stocks edged down in the quarter, a trend observed in the previous three quarters. At the end of 2015, Canadian bonds had expanded to account for two-thirds of all portfolio investment liabilities, a share not seen in more than 10 years.
As a result, Canada's net portfolio investment shifted from a liability position of $127.8 billion in September to a slight asset position of $2.8 billion in December, a gain of $130.6 billion. The narrowing of the net liability portfolio position began in 2012, following four years of expansion post financial crisis.
Net direct investment position increases on revaluation effects
Direct investment assets increased by $95.8 billion to $1,581.0 billion in the fourth quarter. The growth was led by the revaluation effect of a weaker Canadian dollar coupled with higher foreign equity prices. On a geographical basis, the share of direct investment assets in the United States, as opposed to the rest of the world, has been trending upward for the past three years to account for 47% at the end of the year, a level last seen in the first quarter of 2007 before the global financial crisis.
Direct investment liabilities edged down $0.4 billion to $1,134.9 billion. Over the quarter, direct investment liabilities of Canadian affiliates to their foreign parents were reduced by $12.3 billion, mainly from financial transactions. Equity inflows of $22.3 billion were moderated by lower equity market prices.
On a net basis, Canada's direct investment asset position increased by $96.2 billion to $446.1 billion in the fourth quarter. For the year, the net direct investment position also advanced significantly, mainly with the United States. Canada posted a net asset position of $136.9 billion at the end of 2015 with the United States, compared with a net liability position of $22.0 billion at the end of 2014.
Note to readers
For more information on revisions applied to the international investment position as part of the 2015 comprehensive revision of the Canadian System of Macroeconomic Accounts, see "Revisions to Canada's International Investment Position."
The value of assets and liabilities denominated in foreign currency is 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.
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 Canada's assets and liabilities to the rest of the world. An excess of international liabilities over assets can be referred to as Canada's net foreign debt. An excess of international assets over liabilities can be referred to as Canada's net foreign assets.
For more information, contact us (toll-free 1-800-263-1136; 514-283-8300; STATCAN.infostats-infostats.STATCAN@canada.ca).
To enquire about the concepts, methods or data quality of this release, contact Marie-Josée Lamontagne (613-790-8463; firstname.lastname@example.org), International Accounts and Trade Division.
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