Global credit concerns and uncertainty in financial markets during the second half of 2007 resulted in a marginal year-end increase in Canadian foreign investments — $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 — according to a Canadian Portfolio Investment Survey by Statistics Canada.
Holdings of foreign money market paper were down to $7.5 billion from $20.1 billion at the end of 2006.
Despite a gradual shift in asset allocation — especially into the resource rich sectors of emerging markets of the world — 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.
Holdings of stocks continued to account for the bulk of the investment abroad, representing about 80% of total portfolio holdings in 2007. Holdings of U.S. securities remained flat but still represented about 50% of all foreign investments held by Canadian investors. On the other hand, there were significant increases in the level of investments held in emerging markets.
Led by gains in the resources sector, investment in stocks of the BRIC country grouping (Brazil, Russia, India and China) almost doubled to $17.1 billion at the end of 2007, and were up 19.5% in what StatsCan calls the “PANDA” country grouping, comprised of China, Hong Kong and Taiwan.
Holdings of foreign long-term debt instruments also 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.
(06/12/09)