Canada. Drastic Reduction in Holdings of Foreign Money

Canadian investors held $764.7 billion of foreign securities at the end of 2007, up 3.9% from 2006 but in sharp contrast with the 34.6% increase recorded between 2005 and 2006.

The appearance of global credit concerns in the second half of the year created some uncertainties in financial markets and had an impact on the value of investments held by Canadians.

Canadian holdings of foreign stocks were up 3.7% in 2007, while holdings of foreign debt instruments increased 4.7%.

Holdings of stocks continued to account for the bulk of the investment abroad, representing about 80% of total portfolio holdings in 2007. Holdings of US securities remained flat but still represented about 50% of all foreign investments held by Canadians. On the other hand, there were significant increases in the level of investments held in emerging markets.

Investment in stocks of the BRIC country grouping (Brazil, Russia, India and China) almost doubled to $17.1 billion at the end of 2007. Canadian portfolio investment in the PANDA country grouping, which is comprised of China, Hong Kong and Taiwan, increased 19.5%. These increases were led by gains in stocks of the resources sector.

Increased instability in global financial markets during 2007 resulted in a drastic reduction in holdings of foreign money market paper, down to $7.5 billion from $20.1 billion at the end of 2006.

Holdings of foreign long-term debt instruments increased in 2007 but at a much lower pace than in 2006. Activity in the maple bond market slowed significantly after July, as credit concerns increased. However, the strong pace of investment in the first half of the year resulted in sizable increases in holdings of debt instruments in France, Iceland and international organizations.

Canadian investment abroad in securities was spread over 95 countries around the world at the end of 2007, as Canadians continued to diversify their portfolio holdings, especially into the resource rich sectors of emerging markets of the world.

Although, there has been a gradual shift in asset allocation to other regions, the top five destinations of United States, United Kingdom, Japan, Germany and France accounted for $559.1 billion or 73% of Canadian portfolio investments abroad. Meanwhile, $33.3 billion was invested in the top five emerging markets of South Korea, Brazil, Mexico, Taiwan and China.

Source:Statistics Canada, June 12, 2009

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