Canada’s international transactions in securities, May 2019

Foreign investors acquired $10.2 billion of Canadian securities in May, following two months of divestment. At the same time, Canadian investment in foreign securities resumed to reach $4.1 billion, led by purchases of US corporate bonds.

As a result, international transactions in securities generated a net inflow of funds of $6.1 billion in the Canadian economy in May to total $34.2 billion in the first five months of 2019.

Foreign investors purchase federal government bonds

Foreign investment in Canadian securities totalled $10.2 billion in May. Foreign investors acquired Canadian debt instruments but reduced their exposure to Canadian shares in the month.

Non-resident investors added $12.9 billion of Canadian bonds to their portfolio in May. Foreign investment in federal government bonds reached $8.8 billion, mainly secondary market purchases of Canadian dollar-denominated instruments. This was the first monthly investment in these instruments in four months. In addition, non-resident investors added $3.9 billion of federal government business enterprises bonds to their holdings.

Non-resident investors resumed their acquisitions of Canadian money market instruments by adding $1.9 billion to their holdings in May, following three straight months of divestment. Foreign acquisitions of private corporate paper were moderated by a divestment in Government of Canada paper during the month.

Canadian short-term interest rates edged up while long-term interest rates decreased by 10 basis points in May. Meanwhile, the Canadian dollar depreciated against the US dollar by 0.6 US cents.

Foreign investors reduced their exposure to Canadian equities by $4.6 billion in May, the third consecutive monthly divestment. This divestment mainly resulted from sales on the secondary market of shares from the financial corporate sector. Canadian stock prices, as measured by the Standard and Poor’s / Toronto Stock Exchange composite index, were down by 3.3% in May.

Canadian investors purchase foreign bonds and sell equities

Canadian investors resumed their acquisitions of foreign securities with purchases totalling $4.1 billion in May, following a $189 million divestment in April. Purchases of debt instruments were moderated by sales of equities in the month, an investment pattern generally observed since the beginning of 2019.

Canadian acquisitions of foreign debt securities totalled $6.0 billion in May. The activity was led by purchases of foreign bonds, as investors mainly added US corporate bonds and non-US foreign bonds to their holdings. Canadian pension funds were the main contributors to these purchases in the month. US long-term interest rates decreased for a seventh straight month in May.

Canadian investors reduced their holdings of foreign equities by $1.9 billion in May. Sales of non-US shares were moderated by purchases of US shares. This was the first monthly investment in US shares following six straight months during which investors reduced their exposure to this market. The US stock market decreased by 6.6% in May.

StatsCanada

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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