Canada's international investment position, second quarter 2017
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Second quarter 2017
The value of Canada's international financial assets continued to exceed liabilities in the second quarter. The country's net foreign asset position increased by $25.7 billion in the second quarter to $271.5 billion, a fourth consecutive quarterly advance. The increase in the net asset position mainly reflected the stronger performance of foreign stock markets relative to the Canadian stock market. Over the quarter, the US stock market rose 2.6% while the Canadian stock market declined by 2.4%.
However, the increase in Canada's net foreign asset position was moderated by the downward effect of an appreciating Canadian dollar against the United States dollar and net borrowings from international financial transactions. Over the quarter, the Canadian dollar gained 2.5% against the US dollar and 3.4% against the Japanese yen, but lost 4.2% against the euro and 1.2% against the British pound. Over half of Canada's international assets and about one-third of Canada's international liabilities are denominated in US dollars.
On a geographical basis, Canada continued to post a net foreign asset position with non-US countries overall and a net foreign debt position with the United States. The net foreign debt position with the United States amounted to $70.9 billion at the end of the second quarter, down from $89.7 billion in the first quarter.
Higher foreign stock prices and investment in foreign equity push Canada's international assets up
Canada's international assets were up $16.2 billion to $4,456.5 billion at the end of the second quarter. The increase mainly resulted from the growth of foreign stock markets and sizable cross-border investment in equity instruments. The downward revaluation effect of the appreciating Canadian dollar moderated the overall increase.
Canadian holdings of foreign equity instruments increased by $34.3 billion to $3,125.0 billion in the second quarter. In addition to higher foreign stock prices, direct investments in the form of equity instruments in foreign affiliates mainly contributed to the advance. At the same time, Canadian holdings of foreign debt instruments were down by $18.1 billion to $1,331.4 billion.
Canada's international liabilities down despite sizable foreign acquisitions of Canadian bonds
Canada's international liabilities decreased by $9.5 billion to $4,185.0 billion in the second quarter. The downward revaluation effects of both lower Canadian equity prices and the appreciating Canadian dollar against the US dollar contributed to the decline in international liabilities. About one-third of Canada's international liabilities are denominated in US dollars.
Foreign holdings of Canadian equity instruments declined by $19.6 billion to $1,797.1 billion at the end of the quarter. Withdrawal of funds resulting from cross-border merger and acquisition transactions, combined with lower stock prices, contributed to the reduction.
At the same time, Canadian debt instruments held by foreign investors, also referred to as Canada's gross external debt, grew by $10.1 billion to $2,387.9 billion. The increase mainly reflected higher foreign holdings of Canadian bonds, led by strong acquisitions. On a sector basis, foreign investors held $918.4 billion of debt instruments issued by Canadian banks, accounting for 38% of Canada's total gross external debt at the end of the second quarter, compared with 26% in 2013. This growth reflected significant new issues of bonds on foreign markets and higher deposits liabilities with non-residents. Over the same period, the share of the government sector declined from 27% to 20%.
In celebration of the country's 150th birthday, Statistics Canada is presenting snapshots from our rich statistical history.
Annual estimates of Canada's international investment position as a whole were first published in the early 1950s for most years back to 1926. The first quarterly estimates of Canada's international investment position were released in June 2003 with the series going back to 1990.
The composition of Canada's international assets has changed considerably over the years. Holdings of foreign securities represented 42% of total Canada's international assets at the end of the second quarter of 2017. This share has consistently increased in the past four decades. It represented less than 10% in the 1970s and 15% in 1945.
Foreign holdings of Canadian securities have always been an important component of Canada's international liabilities. These holdings accounted for 50% of Canada's total international liabilities at the end of the second quarter of 2017 about the same proportion as in 1945.
Note to readers
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.
The Methodological Guide: Canadian System of Macroeconomic Accounts (13-607-X) is available.
The User Guide: Canadian System of Macroeconomic Accounts (13-606-G) is also available. This publication will be updated to maintain its relevance.
The updated Canada and the World Statistics Hub – United States (13-609-X) is now available from the home page of the Statistics Canada website. This new product illustrates the nature and the extent of Canada's economic and financial relationship with the United States using interactive graphs and tables. This product provides an easy access to information on trade, investment, employment and travel, including merchandise trade by Canadian provinces and US states.
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