Canada's international transactions in securities, May 2018
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Released: 2018-07-16
Foreign investment in Canadian securities slowed to $2.2 billion in May, down from $9.1 billion in April. Meanwhile, Canadian investors resumed their investment in foreign securities by adding $5.7 billion worth to their holdings, mainly in foreign bonds.
The investment pattern in May, both inward and outward, reflected acquisitions of bonds and reductions in holdings of equities. Overall, Canada's international transactions in securities generated a net inflow of funds of $4.6 billion in the Canadian economy in the first five months of 2018, compared with a net inflow of $72.8 billion for the same period in 2017.
Foreign acquisitions of Canadian corporate bonds continue
Foreign investment in Canadian securities was $2.2 billion in May, the lowest level so far in 2018. Non-resident investors added Canadian bonds to their portfolio, but reduced their holdings of money market and equity instruments.
Chart 1
Foreign investment in Canadian securities
Foreign investors acquired $7.3 billion of Canadian bonds in May, as they continued to increase their exposure to corporate bonds and reduce their exposure to government bonds. Foreign acquisitions of corporate bonds reached $8.6 billion, split between private corporate and government business enterprise bonds. Meanwhile, the divestment in government bonds was in the federal sector. Foreign investors have reduced their holdings of federal government bonds by $35.7 billion since December 2017.
Chart 2
Foreign investment in Canadian debt securities
In the Canadian money market, foreign investors reduced their holdings of short-term paper by $2.3 billion in May. The divestment was mainly in private corporate paper. The activity marked a second monthly divestment in these instruments, following a $15.4 billion investment in the first quarter.
Non-resident investors reduced their exposure to Canadian equities by $2.8 billion in May, the first divestment in six months. The reduction was almost equally split between shares and investment fund shares. Redemptions of Canadian equities held by foreign portfolio investors resulting from merger and acquisition activity accounted for a large proportion of the divestment in the month. Canadian stock prices were up by 2.9% in May.
Canadian investors purchase foreign bonds and sell equities
Canadian investors added $5.7 billion of foreign securities to their portfolio in May, mainly in foreign bonds, following two months of divestment.
Chart 3
Canadian investment in foreign securities
Canadian investment in foreign debt securities was $9.2 billion in May, the sixth consecutive monthly investment in these instruments. The activity was led by acquisitions of foreign bonds, as investors added both US and non-US foreign bonds totalling $8.5 billion over the month.
In May, the differential between US and Canadian long-term interest rates widened to 73 basis points, with US rates reaching their highest level since July 2011. Meanwhile, the Canadian dollar edged down against the US dollar.
Canadian investors reduced their holdings of foreign equities by $3.5 billion in May, the third straight month of divestment. The divestment was in US instruments, mainly investment fund shares. Purchases of non-US stocks moderated the overall divestment in the month. Canadian investors have reduced their holdings of US equities by $23.7 billion since March 2018. US stock prices were up by 2.2% in May.
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 the international accounts.
Equity and investment fund shares include common and preferred equities, as well as units/shares of investment funds.
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.
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. This publication will be regularly updated to maintain its relevance.
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