Canada: International Transactions In Securities, Dec 2015

Canadian investors acquired $17.4 billion of foreign securities in December, a second consecutive month of strong investment abroad. Meanwhile, foreign investors reduced their holdings of Canadian securities by $1.4 billion, led by federal government debt securities.

In the fourth quarter, Canada’s international transactions in securities posted a net outflow of funds from the economy of $16.5 billion. In contrast, portfolio investment generated a net inflow of funds to the Canadian economy of $35.2 billion for 2015 as a whole, led by significant foreign investments in Canadian securities in the first half of the year.

Canadian investment in foreign securities remains strong

Canadian investors acquired a high of $17.4 billion in foreign securities in December, following similarly strong investment activity in November. On a quarterly basis, Canadian investment in foreign securities amounted to $37.1 billion in the fourth quarter, also a record investment.

Canadian investors added $9.7 billion of foreign equities to their portfolios in December, mainly non-US foreign shares. This was the largest monthly acquisition of these instruments by Canadians since December 2000. Most major foreign equity markets declined in December, with US stock prices down 1.8%.

Canadian acquisitions of foreign debt securities totalled $7.8 billion in December, and were largely in US bonds. Canadians purchased $3.4 billion of US corporate bonds, the highest such investment since March 2007. Holdings of US Treasury bonds were up by $3.0 billion in December, following strong investments in these instruments in November. US long-term interest rates declined slightly, while US short-term rates increased by 10 basis points in December.

Reduced foreign holdings of federal government debt securities

Non-resident investors reduced their holdings of Canadian securities by $1.4 billion in December, the first monthly decline since July. This divestment occurred in Canadian bonds, as foreigners acquired short-term debt and equity instruments during the month.

Foreign investors reduced their holdings of Canadian bonds by $6.8 billion in December; this included a $10.0 billion divestment in Canadian dollar-denominated instruments. Foreign holdings of federal government bonds were reduced by $5.2 billion, as retirements exceeded secondary market purchases. The remainder of the divestment activity was in municipal government and federal government business enterprise bonds. Foreign acquisitions of Canadian private corporate bonds moderated the overall divestment activity. Canadian long-term interest rates were down by 19 basis points in the month.

Non-resident investment in the Canadian money market totalled $2.7 billion in December. Most of the foreign acquisitions were in provincial and corporate paper, while non-residents reduced their holdings of federal Treasury bills during the month. Canadian short-term interest rates were up slightly in December.

Foreign investment in Canadian equities was $2.6 billion in December, down slightly from the previous month. Canadian stock prices were down 3.4% during the month and the Canadian dollar depreciated against its US counterpart by 2.6 US cents.

StatsCanada

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell