Foreign investors increased their holdings of Canadian securities by $9.0 billion in June, with acquisitions led by significant portfolio investment in equities. At the same time, Canadian investors acquired $4.1 billion of foreign securities, mainly non-US foreign equities.
As a result, international transactions in securities generated a net inflow of funds into the Canadian economy of $4.9 billion in June, for a total of $24.0 billion in the second quarter. This followed a $51.7 billion inflow of funds recorded in the first quarter.
Foreign investors add Canadian shares, but reduce their holdings of Canadian debt securities
Foreign investment in Canadian securities amounted to $9.0 billion in June, following a $14.0 billion investment in May. The investment in June was in Canadian equities, as foreign investors reduced their exposure to debt instruments during the month.
Foreign investment in Canadian equities reached $13.4 billion in June, the largest investment since April 2004. Issuance of new Canadian shares to non-resident portfolio investors, mostly resulting from cross-border mergers and acquisitions, accounted for the bulk of the investment during the month. Foreign purchases of $2.6 billion of Canadian shares on the secondary market also contributed to the inflow of funds. Canadian stock prices, as measured by the Standard and Poor’s / Toronto Stock Exchange composite index, were almost unchanged at the end of June.
Foreign investors reduced their holdings of Canadian bonds by $3.4 billion in June. Foreign divestment in federal government bonds amounted to $8.1 billion, and mainly reflected retirements of instruments denominated in Canadian dollars. This reduction was the largest since June 2014 and followed a strong investment of $9.8 billion in these instruments in May. In addition, foreign holdings of government business enterprise bonds were down by $4.2 billion. Foreign acquisitions of $7.1 billion of Canadian private corporate bonds, mainly new issues denominated in US dollars, moderated the divestment in June. Canadian long-term interest rates were down by 26 basis points in the month.
Non-resident investors reduced their holdings of Canadian money market instruments by $1.0 billion in June. The decline was mainly in federal Treasury bills and, to a lesser extent, corporate paper. Acquisitions of provincial government paper moderated the overall divestment in the month. Canadian short-term interest rates were down, and the Canadian dollar was up by 1.1 US cents against its US counterpart in June.
Canadian investment in foreign securities focuses on equities
Canadian investors added $5.7 billion of foreign equities to their portfolios in June, the largest investment so far in 2016. Activity in the month reflected acquisitions of $4.0 billion of non-US foreign shares and $1.7 billion of US shares. US stock prices edged up in the month.
Canadian investors reduced their holdings of foreign debt securities by $1.5 billion in June, a second consecutive divestment in these instruments. Sales of non-US foreign bonds were moderated by acquisitions of US corporate bonds in the month. US long-term interest rates were down by 17 basis points in June.