Canadian investors reduced holdings of foreign securities by C$12.3B in June, mainly US shares and US money market instruments; non-residents reduced exposure to Canadian securities by C$12.6B, mainly shares of the banking sector: Statistics Canada

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OTTAWA , August 16, 2022 (press release) –

Foreign investors reduced their holdings of Canadian securities by $17.5 billion in June, the largest divestment since December 2018. At the same time, Canadian investors reduced their holdings of foreign securities by $12.3 billion, following a small investment in May.

As a result, international transactions in securities generated a net outflow of funds of $5.2 billion from the Canadian economy in June. Nonetheless, on a year-to-date basis, these transactions generated considerable net inflows of funds of $110.7 billion.

Chart 1: Canada's international transactions in securities

First foreign divestment in Canadian securities in nearly two years
Foreign investors reduced their exposure to Canadian securities by $17.5 billion in June, largely on sales of shares. This was the first foreign divestment in Canadian securities since July 2020. For the first half of the year, foreign investment in Canadian securities reached $82.0 billion, compared with $69.2 billion for the same period in 2021.

Non-resident investors reduced their exposure to Canadian equities by $12.6 billion in June, after divesting $1.2 billion in the previous month. The bulk of the foreign divestment was in shares of the banking sector. Canadian share prices, as measured by the Standard and Poor's/Toronto Stock Exchange composite index, were down by 9.0% in June, the largest percentage decrease since March 2020. In comparison, share prices for Canadian banks, as measured by the Standard and Poor's/Toronto Stock Exchange banking sector index, fell by 11.0%.

Chart 2: Foreign investment in Canadian equity and investment fund shares

Foreign investors reduced their holdings of Canadian debt securities by $5.0 billion in June, the first divestment since March 2021. The divestment was primarily in government (-$15.7 billion) and federal government enterprises (-$8.6 billion) instruments. Foreign acquisitions of Canadian private corporate debt securities moderated the overall reduction of the month. In June, Canadian long-term interest rates reached their highest levels since March 2011. Meanwhile, the Canadian dollar appreciated against major foreign currencies, except the US dollar.

Chart 3: Foreign investment in Canadian debt securities, by sector of issuer

Canadian investors sell US shares
Canadian investors reduced their holdings of foreign securities by $12.3 billion in June, a fourth monthly divestment in 2022. The reduction observed in the month was mainly due to sales of US shares and US money market instruments. For the first half of the year, Canadian divestment in foreign securities totalled $28.7 billion, compared with an investment of $93.6 billion for the same period in 2021.

Canadian investors reduced their exposure to foreign equity markets by $10.3 billion in June. The divestment activity, led by Canadian pension funds, was mainly in US shares. The sales of these instruments reached $9.6 billion in June. US stock prices, as measured by the Standard & Poor 500 composite index, were down by 8.4% in June. Meanwhile, Canadian investors reduced their exposure to non-US foreign shares by $703 million.

Chart 4: Canadian investment in foreign equity and investment fund shares

Meanwhile, Canadian investors sold $2.0 billion of foreign debt securities in June, their first divestment since January 2021. In June, US long-term interest rates increased and reached their highest levels since October 2018.

Note to readers
The data series on international transactions in securities covers portfolio transactions in equity and investment fund shares, bonds, and money market instruments for both Canadian and foreign issues. This activity excludes transactions in equity and debt instruments between affiliated enterprises. These are classified as foreign direct investment in international accounts.

Equity and investment fund shares include common and preferred equities, as well as units or shares of investment funds. For the sake of brevity, the terms "shares" and "equity and investment fund shares" have the same meaning.

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.

All values in this release are net transactions unless otherwise stated.

Next release
Data on Canada's international transactions in securities for July will be released on September 16.

Products
The Canada and the World Statistics Hub (Catalogue number13-609-X) is available online. This product illustrates the nature and extent of Canada's economic and financial relationship with the world using interactive graphs and tables. This product provides easy access to information on trade, investment, employment and travel between Canada and a number of countries, including the United States, the United Kingdom, Mexico, China and Japan.

As a complement to this release, the data visualization product "Securities statistics," part of the series Statistics Canada – Data Visualization Products (Catalogue number71-607-X), is available online.

The User Guide: Canadian System of Macroeconomic Accounts (Catalogue number13-606-G) is also available.

The Methodological Guide: Canadian System of Macroeconomic Accounts (Catalogue number13-607-X) is available.

Contact information
For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; infostats@statcan.gc.ca) or Media Relations (statcan.mediahotline-ligneinfomedias.statcan@statcan.gc.ca).

Industry Intelligence Editor's Note: This press release omits select charts and/or marketing language for editorial clarity. Click here to view the full report.

 

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