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Canada's international investment position, first quarter 2018

Released: 2018-06-13

Canada's net international investment position

$544.2 billion

First quarter 2018

Canada's net foreign asset position rose by $110.1 billion to a record $544.2 billion in the first quarter, a second consecutive quarterly increase. This growth mainly reflected the overall upward revaluation effect (+$103.6 billion) of a depreciating Canadian dollar against all major foreign currencies. Over the quarter, the Canadian dollar depreciated against the US dollar (-2.7%), the euro (-5.1%), the British pound (-6.3%) and the Japanese yen (-8.1%).

At the end of the first quarter, 97% of Canada's international assets were denominated in foreign currencies, compared with 40% of Canada's international liabilities. The US dollar was the most important foreign currency of denomination for both international assets (62%) and liabilities (31%).

On a geographical basis, Canada's net asset position with the United States reached $75.2 billion at the end of the first quarter. At the same time, Canada's net foreign asset position with countries other than the United States totalled $469.0 billion.

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

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

Canada's international assets up on a weaker Canadian dollar

Canada's international financial assets rose by $60.6 billion to $4,862.7 billion at the end of the first quarter. The increase was mostly due to the upward revaluation effect (+$159.2 billion) of the depreciating Canadian dollar. The decline in foreign stock prices moderated the overall increase. Over the quarter, the US stock market was down by 1.8% and the European stock market declined by 4.1%.

On an instrument basis, Canadian holdings of foreign direct and portfolio equity instruments increased by $38.8 billion to $3,461.8 billion in the first quarter. Almost 50% of all holdings of foreign equities were in the form of portfolio investment at the end of March 2018, up from a share of just over 40% at the end of 2011.

Canadian holdings of foreign debt instruments were up $21.8 billion in the first quarter to $1,400.9 billion. Other than the revaluation due to the exchange rate movements, strong acquisitions of foreign bonds and an increase in loan assets with non-residents contributed to the gain.

On a geographical basis, Canada's international assets held in the United States were up $45.7 billion to $2,595.9 billion. Comparatively, Canada's international assets in countries other than the United States increased by $14.9 billion to $2,266.8 billion at the end of the quarter.

Chart 3  Chart 3: International assets and liabilities
International assets and liabilities

Canada's international liabilities down on lower Canadian equity prices

Canada's international liabilities were down $49.5 billion to $4,318.5 billion in the first quarter. The decrease mainly resulted from lower Canadian equity prices. Over the quarter, the Canadian stock market was down by 5.2%. This decline was moderated by the upward revaluation effect of the weaker Canadian dollar and, to a lesser extent, inflows of funds from the financial account.

Canadian equity instruments held by foreign direct and portfolio investors decreased by $78.5 billion to $1,818.5 billion in the first quarter, mainly on lower equity prices. The decline was moderated by foreign acquisitions of Canadian equity instruments, mostly from foreign direct investors. About two-thirds of the total foreign investment in Canadian equity was in the form of direct investment at the end of the first quarter.

Canada's gross external debt increased by $29.0 billion to $2,500.0 billion. Other than the effect of the revaluation of the Canadian dollar, the increase was mainly due to large foreign acquisitions of Canadian money market instruments during the quarter.

Canada's international liabilities with the United States were down by $55.6 billion to $2,520.7 billion in the first quarter, mostly on a decline in equity instruments. Comparatively, Canada's international liabilities with countries other than the United States were up by $6.1 billion to $1,797.8 billion. The growth was mostly due to increased foreign holdings of Canadian bonds.



  Note to readers

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. 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.

Foreign direct investment is presented on an asset-liability principle basis (that is, gross basis) in the international investment position. Foreign direct investment can also be presented on a directional principle basis (that is, net basis), as shown in supplementary foreign direct investment tables (36-10-0008-01) and (36-10-0009-01).The difference between the two foreign direct investment conceptual presentations resides in the classification of reverse investment such as (1) Canadian affiliates' claims on foreign parents and (2) Canadian parents' liabilities to foreign affiliates. Under the asset/liability presentation, (1) is classified as an asset and included in direct investment assets, and (2) is classified as a liability and included in direct investment liability.

Products

The article, Currency composition of Canada's international investment position, part of Latest Developments in the Canadian Economic Accounts (Catalogue number13-605-X), is available.

The Methodological Guide: Canadian System of Macroeconomic Accounts (Catalogue number13-607-X) is available.

The User Guide: Canadian System of Macroeconomic Accounts (Catalogue number13-606-G) is also available. This publication will be updated to maintain its relevance.

The updated Canada and the World Statistics Hub (Catalogue number13-609-X) is available online. This product illustrates the nature and extent of Canada's economic and financial relationship with the world using interactive graphs and tables. This product provides easy access to information on trade, investment, employment and travel between Canada and a number of countries, including the United States, the United Kingdom, Mexico, China and Japan.

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 Vicky Gélinas (613-716-2828; vicky.gelinas@canada.ca), International Accounts and Trade Division.

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