Canada's international transactions in securities, May 2021
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Released: 2021-07-16
Foreign investors acquired $20.8 billion in Canadian securities in May, mainly in the form of government debt securities. At the same time, Canadian investors increased their holdings of foreign securities by $10.7 billion, led by acquisitions of US shares.
As a result, international transactions in securities generated a net inflow of funds of $10.1 billion in the Canadian economy in May. This activity followed five consecutive months marked by net outflows of funds, where Canadian acquisitions of foreign securities exceeded foreign acquisitions of Canadian securities.
Chart 1
Canada's international transactions in securities
Foreign investment focuses on Canadian government debt securities
Non-resident investors acquired $20.8 billion of Canadian securities in May, their largest investment in a year. Foreign investment targeted government debt securities, mainly from the federal government sector. A foreign divestment in Canadian equities moderated the overall acquisition activity in the month.
Foreign investors added $15.5 billion of federal government debt securities to their portfolios in May, their second-largest investment on record after the unprecedented level observed in April 2020 during the first wave of the COVID-19 pandemic in Canada. This activity reflected purchases of both Treasury bills (+$9.8 billion) and bonds (+$5.7 billion). In May, the federal government's overall borrowing activities in the form of debt securities reached their highest levels since October 2020. In addition, foreign acquisitions of provincial government debt securities amounted to $5.2 billion in May, led by new issues of bonds denominated in foreign currencies.
Chart 2
Foreign investment in Canadian debt securities, by sector of issuer
Foreign holdings of private corporate debt securities edged up in May, as a $6.1 billion investment in bonds was largely offset by a $5.6 billion divestment in money market instruments. Foreign investment targeted debt instruments of Canadian financial corporations denominated in US dollars and in euros.
In May, Canadian long-term interest rates fell by 8 basis points, the largest decline in more than a year. Meanwhile, the Canadian dollar appreciated against its US counterpart by 1.4 US cents, reaching its highest level since January 2015.
Foreign investors reduce their holdings of Canadian equity securities
Non-resident investors reduced their overall exposure to Canadian equities by $3.3 billion in May, the first reduction since June 2020. Net redemptions of Canadian shares held by foreign portfolio investors resulting from cross-border merger and acquisition activities accounted for the reduction. Foreign purchases of Canadian shares on the secondary market, led by shares of chartered banks, moderated the overall reduction in the month. Canadian equity prices, as measured by the Standard and Poor's/Toronto Stock Exchange composite index, were up by 3.3% in May to reach a new record-high level.
Chart 3
Foreign investment in Canadian equity and investment fund shares
Canadian investment in foreign securities focuses on US shares
Canadian investors increased their holdings of foreign securities by $10.7 billion in May. This marked a thirteenth consecutive month of investment in these instruments for a total of $151.6 billion, with two-thirds in the form of US shares.
In May, investors targeted US shares again, with purchases totalling $8.5 billion, mainly shares of large capitalization technology firms. US stock prices, as measured by Standard and Poor's 500 composite index, edged up in May to reach a record-high level. Meanwhile, Canadian holdings of non-US foreign shares were down by $1.6 billion.
Chart 4
Canadian investment in US securities, by instrument type
Canadian investment in foreign debt securities reached $3.7 billion in May, mainly in US dollar-denominated instruments. The activity mainly reflected acquisitions of US bonds, both from the government and corporate sectors. US long-term interest rates fell slightly in May, after posting an upward trend that began in August 2020.
Note to readers
The data series on international transactions in securities covers portfolio transactions in equity and investment fund shares, bonds and money market instruments for both Canadian and foreign issues. This activity excludes transactions in equity and debt instruments between affiliated enterprises, which are classified as foreign direct investment in international accounts.
Equity and investment fund shares include common and preferred equities, as well as units or shares of investment funds. For the sake of brevity, the terms "shares" and "equity and investment fund shares" have the same meaning.
Debt securities include bonds and money market instruments.
Bonds have an original term to maturity of more than one year.
Money market instruments have an original term to maturity of one year or less.
Government of Canada paper includes Treasury bills and US-dollar Canada bills.
All values in this release are net transactions unless otherwise stated.
Next release
Data on Canada's international transactions in securities for June will be released on August 17, 2021.
Products
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.
The data visualization product "Securities statistics," part of the series Statistics Canada – Data Visualization Products (71-607-X), is available online.
The Canada and the World Statistics Hub (13-609-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.
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