Canadian investment in foreign securities reaches a record highStaff writer ▼ | January 20, 2016
Canadian investors acquired a record $16.5 billion of foreign securities in November, mainly US securities.
Investments Net outflow of funds was $13.9 billion from the Canadian economy
Foreign investors added $2.8 billion of Canadian shares to their holdings.
As a result, Canada's international transactions in securities generated a net outflow of funds of $13.9 billion from the Canadian economy in November, following two months of significant net inflows.
Canadian investors acquired a record $16.5 billion of foreign securities in November, almost evenly split between foreign bonds and equities. Canadian investment in US securities accounted for the bulk of the activity.
Acquisitions of US Treasury bonds and US equities both reached record levels during the month.
Canadian acquisitions of foreign debt securities reached $8.5 billion in November, including an $8.7 billion investment in US Treasury bonds. Investment in these bonds were mainly in instruments with medium- and long-term maturities. A divestment of $1.1 billion in non-US foreign bonds moderated the overall outflows in the month.
In November, long-term interest rates were up by 19 basis points in the United States compared with an increase of 12 basis points in Canada. As a result, the differential between US and Canadian rates widened in favour of investments in the United States.
Canadian investors resumed their acquisitions of foreign equities in November after two consecutive months of divestment, adding $7.9 billion worth to their holdings. The highest such investment in 15 years was led by purchases of US equities of $7.4 billion. US stock prices edged up in November. The Canadian dollar was down by 2.1% to close the month at 74.9 US cents.
Foreign investors added $2.6 billion of Canadian securities to their portfolios in November, following a $19.1 billion investment in October.
Foreign investment in Canadian bonds slowed to $1.5 billion in November, compared with a $12.4 billion acquisition in October. Non-residents purchased both government bonds ($904 million) and corporate bonds ($627 million) in the month. New issues of Canadian bonds placed abroad weakened in November.
Non-resident investors reduced their holdings of Canadian money market instruments by $1.7 billion in November, mainly as a result of retirements of provincial government paper.
This reduction was moderated by an investment in Canadian Treasury bills in the month. Canadian short-term interest rates were up by seven basis points in November.
Foreign investors added $2.8 billion of Canadian shares to their holdings in November, down slightly from the previous month. Canadian stock prices edged down 0.4% in the month. ■