Analysis – June 2011
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Non-residents reduced their holdings of Canadian securities by $3.5 billion in June, all of it in debt instruments, following several months of investment. Canadian investment in foreign securities slowed to $343 million in June, as acquisitions of foreign stocks were partially offset by sales of foreign debt securities.
Foreign holdings of Canadian bonds down as a result of retirements
Foreign investors divested $4.5 billion of Canadian bonds in June, following an acquisition of $11.1 billion in May. On a monthly basis, non-residents have divested Canadian bonds twice since December 2008, a period during which their holdings increased by nearly 30%. Overall, foreign investors' acquisitions of Canadian bonds in the second quarter matched that of the first quarter.
Activity in June was dominated by net retirements of $6.4 billion of Canadian government bonds, mainly federal bonds. Retirements were moderated by foreign acquisitions of $3.7 billion of Canadian bonds on the secondary market, focused on Canadian dollar denominated bonds issued by the federal government and its enterprises.
Non-resident investors' holdings of Canadian money market instruments declined by $981 million in June, mainly from net retirements of paper issued by Canadian banks. At the same time, foreign investors' holdings of federal Treasury bills was down slightly after two months of acquisitions totalling $5.9 billion. Nevertheless, acquisitions of overall Canadian money market instruments in both April and May led to the largest quarterly foreign inflow since the first quarter of 2009.
Note to readers
All values in this release are net transactions unless otherwise stated.
The data series on international security transactions cover portfolio transactions in stocks, bonds and money market instruments for both Canadian and foreign issues.
Stocks include common and preferred equities, as well as warrants.
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.
Foreign purchases of Canadian equities focus on the secondary market
Non-residents' purchases of Canadian corporate shares increased to $2.0 billion in June, as Canadian stock prices continued to decline to their lowest level since November 2010. Secondary market acquisitions accounted for most of the activity over the month and targeted Canadian stocks issued by technology and gold firms.
Canadians further reduce their holdings of foreign bonds
Canadian investors reduced their holdings of foreign bonds by $3.2 billion in June, a fourth straight monthly divestment in these instruments. This activity was concentrated in US government bonds, down $4.0 billion in June. This was partially offset by acquisitions of bonds from Japan and other Organisation of Economic Co-operation and Development countries.
Canadian investors' focus remains on US corporate shares
Canadian investors acquired foreign stocks for a sixth straight month in June, adding a further $3.8 billion to their holdings. US stocks again accounted for most of this activity, although down from May. By the end of June, stock prices in most major world equity markets had increased except in North America.
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