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Canada's international investment position, first quarter 2016

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Released: 2016-06-13

Canada's net international investment position

$264.8 billion

First quarter 2016

After six quarters of gains, Canada's net foreign asset position decreased by $220.2 billion in the first quarter to $264.8 billion. This decline more than offset the $201.7 billion gain recorded in the fourth quarter of 2015.

Overall, Canada's international assets were down in the first quarter, while international liabilities edged up. As a result, the net international investment position deteriorated for the first time since the second quarter of 2014. During this period, Canada went from being a net foreign debtor to being a net foreign creditor.

Chart 1  Chart 1: Canada's international investment position
Canada's international investment position

The appreciation of the Canadian dollar, combined with the stronger performance of the Canadian stock market relative to foreign stock markets, mainly contributed to the decline in the net foreign asset position. Net borrowings from abroad to finance an ongoing current account deficit also added to the decrease in the quarter.

Chart 2  Chart 2: Contributors to the quarterly change in the net international investment position
Contributors to the quarterly change in the net international investment position

Canada's international assets decline on a stronger Canadian dollar

Canada's international assets were down by $190.9 billion to $3,863.2 billion at the end of the first quarter, the largest decrease since the third quarter of 2008. The decline in Canadian holdings of foreign assets mainly resulted from a stronger Canadian dollar relative to most major foreign currencies. The Canadian dollar gained 6.6% against the US dollar, 9.4% against the British pound and 1.7% against the euro in the quarter, while it lost 0.3% against the Japanese yen.

Canadian holdings of foreign securities were reduced by $106.8 billion to $1,574.9 billion at the end of the quarter. In addition to the downward effect of an appreciating Canadian dollar, weaker foreign stock markets and sales by Canadian investors also contributed to the decrease in these holdings. The Standard and Poor's index (500) edged up 0.8% in the first quarter, while most other major foreign stock markets were down.

Direct investment assets declined by $61.8 billion to $1,516.9 billion, despite the $14.0 billion investment made by Canadian direct investors in foreign affiliates. Other investment assets decreased $18.8 billion to $664.7 billion on lower deposits held by Canadians abroad.

Canada's international liabilities up on higher equity prices

Canada's international liabilities advanced by $29.3 billion to $3,598.4 billion in the first quarter. The growth was in equity instruments, up $96.1 billion, but was moderated by a decrease in debt instruments.

Direct investment equities were up $68.1 billion, and portfolio investment equities rose $28.0 billion, mainly on higher Canadian equity prices. Over the quarter, the Standard and Poor's / Toronto Stock Exchange composite index gained 3.7%.

Foreign holdings of Canadian debt instruments were down $66.8 billion to $2,085.9 billion, the first decrease since the second quarter of 2014. About two-thirds of these holdings are denominated in foreign currencies. Deposits held in Canada by non-residents declined $60.3 billion, reflecting both downward currency revaluations and outflows of funds. Canadian debt securities held by foreign investors were almost unchanged in the quarter as strong foreign acquisitions were offset by the revaluation effect of the stronger Canadian dollar.

Chart 3  Chart 3: Foreign holdings of Canadian debt instruments, by currency
Foreign holdings of Canadian debt instruments, by currency



  Note to readers

Revisions

For more information on the 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."

Currency valuation

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.

Definitions

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.

Products

The Methodological Guide: Canadian System of Macroeconomic Accounts (Catalogue number13-607-X) is available from the Browse by key resource module of our website, under Publications.

The User Guide: Canadian System of Macroeconomic Accounts (Catalogue number13-606-G) is also available from the Browse by key resource module of our website, under Publications. This publication will be updated to maintain its relevance.

Contact information

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; marie-josee.lamontagne@canada.ca), International Accounts and Trade Division.

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