Foreign investors added $3.1 billion of Canadian securities to their holdings in August, after a $10.1 billion divestment in July. At the same time, Canadian investment in foreign securities resumed with acquisitions totalling $8.7 billion, mainly US securities.
Foreign investors acquire Canadian debt securities and sell equities
Foreign investors added $3.1 billion of Canadian securities to their holdings in August. The activity during the month was all in the form of debt securities, as non-residents reduced their exposure to Canadian stocks for the third time in four months.
Foreign acquisitions of Canadian bonds amounted to $5.6 billion, mainly federal government and federal government business enterprise bonds. Albeit small, foreign investors continued to reduce their exposure to provincial government bonds in August with a seventh consecutive monthly divestment in these instruments.
Net cross-border transactions in the Canadian money market were subdued in August, with foreign investors acquiring $249 million worth of these instruments. Foreign acquisitions of $2.3 billion of federal Treasury bills were largely offset by a reduction in holdings of Canadian corporate paper. Both short- and long-term interest rates in Canada were down, while the Canadian dollar depreciated slightly against its US counterpart in August.
Foreign investors reduced their holdings of Canadian shares by $2.7 billion in August, following a $9.7 billion divestment in July. This divestment during the month resulted from sales on the secondary market. The Canadian stock market was down by 4.2% during the month, the largest decline in 11 months.
Canadian acquisitions of foreign securities resume
Canadian investment in foreign securities resumed in August with acquisitions totalling $8.7 billion. This activity followed a slight divestment in July. US securities accounted for most of the acquisitions during the month.
Canadian investment in foreign debt securities totalled $2.9 billion in August. Canadians purchased $2.6 billion of US corporate bonds, marking the highest such activity since March 2007. Holdings of US Government bonds were up by $2.5 billion, following a $4.0 billion investment in July. A divestment in non-US foreign bonds moderated the overall acquisitions during the month. US long-term interest rates declined by 15 basis points in August.
Canadian investment in foreign equities was $5.8 billion in August, the largest since July 2014. This investment included both US and non-US foreign shares. Canadian acquisitions of US equities were the highest in 2015 at $3.2 billion, at the same time as a sizable decline in US stock prices.