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The following is the text of Canada’s international transactions report for September released by Statistics Canada.
Foreign investment in Canadian securities advanced to $13.9 billion in September on the strength of purchases of government bonds and corporate equities. Canadian investment in foreign securities reached a six-month high of $6.0 billion, led by the acquisition of US equities.
Foreign investment in Canadian debt securities focuses on government bonds
Foreign investors acquired $10.6 billion of Canadian debt securities in September, the largest such investment since May. This activity reflected increased demand for Canadian bonds, partly offset by lower purchases of money market instruments. Foreign investors have acquired $55.8 billion of Canadian debt securities so far in 2012, on par with the level of investment observed for the same period in 2011. The investment focus, however, has shifted from federal Treasury bills in 2011 to federal bonds in 2012.
Non-residents’ investment of $9.1 billion in Canadian bonds in September was led by purchases of government bonds on the secondary market, mainly Canadian dollar-denominated instruments. Non-residents added $5.9 billion of federal government bonds to their holdings, mostly short-term bonds, as the total amount of federal bonds outstanding declined over the month. This activity led to a further increase in the proportion of these bonds held by foreign investors by month-end, a share that has increased steadily since the end of 2008. The remainder of the activity in the Canadian bond market in September targeted provincial issues, where non-residents made the largest acquisition in a year.
Non-residents invested $1.5 billion in the Canadian money market in September, with three-quarters in paper issued by public enterprises. Foreign acquisitions of federal Treasury bills remained subdued despite a second month of increase in the outstanding amount of this instrument.
Non-residents acquired $3.3 billion of Canadian equities in September, largely shares of the banking sector. Secondary market purchases accounted for nearly all of the activity in the month and amounted to the largest such investment since November 2011. Canadian equity prices continued on an upward trend that began in June, posting a 3.1% gain in September.
Canadian investors acquired $4.5 billion of foreign equities in September, the largest such investment since March. Purchases of US shares strengthened for a third month, to $3.6 billion, led by demand from Canadian pension funds. By month-end, US stock prices were at their highest level since December 2007. Canadian investment in non-US foreign stocks was mainly composed of European and Asian stocks and followed a large divestment in August.
Canadian investors added $1.6 billion of foreign debt securities to their portfolios in September, following a divestment in August. This activity reflected a $2.0 billion acquisition of foreign bonds, led by maple bonds.
Canadian investment in maple bonds (Canadian dollar- denominated foreign bonds) was $1.7 billion, the largest such outflow since October 2007, just after the emergence of global credit concerns. The remainder of the activity in foreign debt instruments in September amounted to a small divestment, led by US government issues with short-term maturities.
The US dollar depreciated further against the Canadian dollar in September, ending the month at the lowest value since August 2011. In addition, yield differentials between Canada and the United States for both long- and short-term government debt instruments continued to favour investment in Canada.
The data series on international transactions in securities cover portfolio transactions in equity and investment fund shares, bonds and money market instruments for both Canadian and foreign issues.
Equity and investment fund shares include common and preferred equities as well as units/shares of investment funds.
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.
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