Foreign investment in Canadian securities slowed in October with non-residents adding $2.0 billion to their holdings, compared with an average acquisition of $9.2 billion over the previous three months. Canadian investors acquired foreign securities at a slightly higher pace than in the previous three months, with purchases of $2.2 billion.
Foreign portfolio investment in Canadian securities
Foreign acquisition of Canadian debt securities slows
Non-residents added $1.2 billion of Canadian bonds to their holdings in October, led by the first investment in federal bonds in five months. Acquisitions of $4.2 billion of Canadian dollar denominated federal debt securities were focused on medium-term maturities. This investment was partially offset by retirements of Canadian private corporate bonds and provincial bonds, mostly foreign currency denominated instruments. Short- and long-term interest rates in Canada increased in October after three straight months of decline.
In the Canadian money market, non-resident acquisitions slowed to $615 million in October. This followed a $7.2 billion purchase in September, primarily accounted for by investment in Federal Treasury bills. Non-residents added another $1.1 billion to their holdings of federal paper over the month, but this was partially offset by retirements of non-financial corporate paper.
Non-resident purchases of Canadian equities also down
Foreign investors added Canadian corporate shares to their portfolios for a sixth consecutive month in October, though at a slower pace. The $196 million acquisition was the lowest monthly foreign investment in these instruments in six months. Activity in October was evenly split between purchases of new equities and acquisitions of existing shares on the secondary market. Canadian stock prices were up 5.4% in October, following seven months of decline.
Canadian investors increase their holdings of foreign bonds
Canadians acquired $1.1 billion of foreign bonds in October, led by investment in US Treasury notes with short- term maturities. This was the second consecutive month, and the third time in 2011, that residents invested in US government bonds. Canadian investors also added US corporate bonds and bonds from other countries to their holdings in October, as the differential between long- and short-term interest rates in the United States widened for the first time in four months.
Canadian investors continue to add foreign stocks to their holdings
Canadians invested in foreign stock markets for a 10th straight month in October, adding $1.1 billion of foreign corporate shares to their portfolios. These purchases were led by a $1.4 billion acquisition of non-US foreign stocks, the largest such investment since June 2010. However, this activity was moderated by the first divestment in US equities since December 2010. Stock prices in most world equity markets increased in October, led by European exchanges. The Canadian dollar rose above parity with the U.S. dollar at month-end.
Note to readers
All values in this release are net transactions unless otherwise stated.
The data series on international security transactions cover portfolio transactions in stocks, bonds and money market instruments for both Canadian and foreign issues.
Stocks include common and preferred equities, as well as warrants.
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.
To contact the reporter on this story: Ilan Kolet in Ottawa at firstname.lastname@example.org
To contact the editor responsible for this story: Marco Babic at email@example.com