Foreign investment in Canadian securities lowest since beginning of year

Investors acquired Canadian shares and money market instruments instead, says StatsCan

Mario ToneguzziForeign investment in Canadian securities slowed to $2.8 billion in August, down from $15.3 billion in July, Statistics Canada reported on Tuesday.

The federal agency also said that Canadian investors reduced their holdings of foreign securities by $194 million as they acquired bonds but sold equities.

“As a result, Canada’s international transactions in securities generated a net inflow of funds in the economy of $3.0 billion in August,” said StatsCan.

Foreign investment in Canadian securities was the lowest monthly investment since the beginning of the year. Foreign investors acquired Canadian shares and money market instruments but reduced their exposure to Canadian bonds in the month, explained the federal agency.

“Foreign holdings of Canadian bonds were down $7.4 billion in August, as non-residents reduced their holdings of both government and corporate bonds,” said Statistics Canada. “This decline followed investment of $12.7 billion in July. The reduction in holdings of government bonds in August was all in federal bonds (-$3.8 billion). Foreign investors reduced their exposure to federal government bonds for the eighth time in nine months, totalling $33.1 billion over the period.

“Meanwhile, non-residents reduced their holdings of private corporate bonds by $3.3 billion, the first divestment since June 2015. New issues abroad by Canadian private corporate firms were at their lowest level in 30 months. From July 2015 to July 2018, foreign investment in Canadian private corporate bonds totalled $242.9 billion, largely new issues denominated in foreign currencies.”

StatsCan said foreign acquisitions of Canadian equities reached $5.3 billion in August, the third straight month of investment and the highest level since May 2017.

“Foreign purchases targeted shares from every sector of the Canadian economy during August. Canadian stock prices were down by 1.0 per cent in the month, following growth of nearly seven per cent from March to July.

“Foreign investors resumed their acquisitions of Canadian money market instruments by adding $4.9 billion worth to their holdings in August, the first investment in five months. Foreign purchases of federal government business enterprise paper accounted for the bulk of the investment,” said the report.

Mario Toneguzzi is a veteran Calgary-based journalist who worked for 35 years for the Calgary Herald, including 12 years as a senior business writer.

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