Canada's international transactions in securities, July 2022
Both foreign investment in Canadian securities and Canadian investment in foreign securities resumed in July, following significant divestments in June. Foreign investors acquired $14.8 billion of Canadian securities, while Canadian investors added $4.3 billion of foreign securities to their holdings. The activity in July largely focused on bonds.
As a result, international transactions in securities generated a net inflow of funds of $10.5 billion into the Canadian economy in July, after a net outflow of funds of $3.1 billion in June.
Foreign investment in Canadian securities resumes
Foreign investors resumed their acquisitions of Canadian securities, buying $14.8 billion in July after divesting $17.6 billion in June. The investment in July mainly targeted debt securities issued by Canadian private corporations and, to a lesser extent, federal government bonds. This activity was moderated by a reduction in foreign holdings of government paper and Canadian equity securities.
Foreign investment in Canadian private corporate debt securities totalled $18.3 billion in July, largely as new issuances of US dollar-denominated instruments of Canadian chartered banks. At the same time, non-resident investors increased their exposure to federal government bonds by $7.5 billion, their largest investment in 2022. On the other hand, they reduced their holdings of government paper, both federal (-$3.5 billion) and provincial (-$2.8 billion). In July, Canadian long-term interest rates fell by 52 basis points, while short-term interest rates rose by 56 basis points. Meanwhile, the Canadian dollar appreciated against the US dollar.
The reduction in foreign holdings of Canadian equity securities totalled $2.2 billion in July after a considerable divestment of $12.7 billion in the previous month. Canadian companies buying back shares from their foreign investors contributed to the overall reduction in July. Canadian share prices, as measured by the Standard and Poor's/Toronto Stock Exchange composite index, posted the largest gain in July since October 2021, after three consecutive months of decrease.
Canadian investment in foreign securities focuses on US bonds
Canadian investors acquired $4.3 billion of foreign securities in July, following a significant divestment of $14.6 billion in June. Investment activity in July was led by acquisitions of US government bonds.
Canadian investment in US government bonds totalled $5.2 billion in July, the largest investment in 2022. Since the beginning of the year, Canadian purchases of US government bonds amounted to $13.3 billion, compared with a marginal $354 million divestment during the same period in 2021. In July, US long-term interest rates were down by 24 basis points, the first reduction since December 2021.
Canadian investors marginally reduced their holdings of foreign shares in July, after a sizable divestment of $12.6 billion in June, largely in US equities. In July, investors added $1.1 billion of non-US foreign shares to their portfolios, and they sold almost the same amount of US shares. Overall, Canadian investors reduced their exposure to foreign equity securities in 2022 by $55.3 billion, led by sales of US shares. US stock prices, as measured by the Standard and Poor's/Toronto Stock Exchange 500 composite index, were up 9.1% in July recovering the loss recorded in June.
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. These 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.
Data on Canada's international transactions in securities for August will be released on October 18.
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.
As a complement to this release, the data visualization product "Securities statistics," part of the series Statistics Canada – Data Visualization Products (71-607-X), is available online.
The User Guide: Canadian System of Macroeconomic Accounts (13-606-G) is also available.
The Methodological Guide: Canadian System of Macroeconomic Accounts (13-607-X) is available.
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