Canada's international transactions in securities, August 2018

Released: 2018-10-16

Foreign investment in Canadian securities slowed to $2.8 billion in August, down from $15.3 billion in July. At the same time, Canadian investors reduced their holdings of foreign securities by $194 million as they acquired bonds but sold equities.

As a result, Canada's international transactions in securities generated a net inflow of funds in the economy of $3.0 billion in August.

Foreign investment in Canadian securities slows

Foreign investment in Canadian securities slowed to $2.8 billion in August, the lowest monthly investment since the beginning of the year. Foreign investors acquired Canadian shares and money market instruments but reduced their exposure to Canadian bonds in the month.

Chart 1 
Foreign investment in Canadian securities

Foreign holdings of Canadian bonds were down $7.4 billion in August, as non-residents reduced their holdings of both government and corporate bonds. This decline followed investment of $12.7 billion in July. The reduction in holdings of government bonds in August was all in federal bonds (-$3.8 billion). Foreign investors reduced their exposure to federal government bonds for the eighth time in nine months, totalling $33.1 billion over the period.

Meanwhile, non-residents reduced their holdings of private corporate bonds by $3.3 billion, the first divestment since June 2015. New issues abroad by Canadian private corporate firms were at their lowest level in 30 months. From July 2015 to July 2018, foreign investment in Canadian private corporate bonds totalled $242.9 billion, largely new issues denominated in foreign currencies.

Chart 2 
Foreign investment in Canadian bonds

Foreign acquisitions of Canadian equities reached $5.3 billion in August, the third straight month of investment and the highest level since May 2017. Foreign purchases targeted shares from every sector of the Canadian economy during August. Canadian stock prices were down by 1.0% in the month, following growth of nearly 7% from March to July.

Foreign investors resumed their acquisitions of Canadian money market instruments by adding $4.9 billion worth to their holdings in August, the first investment in five months. Foreign purchases of federal government business enterprise paper accounted for the bulk of the investment.

Canadian short-term interest rates increased by 14 basis points to close the month at their highest level since the end of 2008. Canadian long-term rates were up four basis points and the Canadian dollar appreciated slightly against its US counterpart in the month.

Canadian investors reduce their holdings of US equities

Canadian investors sold $194 million of foreign securities in August. A divestment in foreign equities was moderated by purchases of foreign debt securities.

Canadian investors reduced their holdings of foreign equities by $3.7 billion in August, the fifth month of divestment in the last six months. Overall, Canadian investors have reduced their holdings of foreign equities by $19.9 billion since March 2018. The divestment was all in US shares (-$27.0 billion) and followed strong acquisitions of these instruments in the previous 15 months (+$75.2 billion). Sales of US shares were moderated by purchases of non-US shares in August.

Canadians invested $3.5 billion in foreign debt securities in August, down from a record high of $13.9 billion in July. Acquisitions of non-US foreign bonds and, to a lesser extent, US corporate bonds were the main contributors to the investment activity. Since March 2018, Canadians have increased their exposure to US debt securities by $25.1 billion, almost completely offsetting the divestment in US equities over the same period.

US short-term interest rates increased by eight basis points, while US long-term rates were unchanged in August.

Chart 3 
Canadian investment in foreign securities

Products

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 regularly 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 Éric Simard (613-219-5932; eric.simard@canada.ca), International Accounts and Trade Division.