Stock market recovery boosts foreign investment position

By James Langton | December 10, 2020 | Last updated on December 10, 2020
1 min read
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The rebound in global stock markets boosted Canada’s international investment position in the third quarter, Statistics Canada reports.

Canada’s net foreign asset position rose by $94.4 billion to $1.17 trillion in the third quarter.

“For a second consecutive quarter, the increase was due to higher equity prices,” StatsCan said, noting that this was offset by shifting exchange rates and higher foreign borrowing.

Through the first nine months of 2020, Canada’s net foreign asset position is up by $191.3 billion, driven mainly by market gains.

“Since a greater share of Canada’s international assets is in the form of equity instruments than its international liabilities, stock price fluctuations tend to have a greater impact on the value of the assets,” the agency said.

Overall, Canada’s international assets rose by $139.2 billion to a record $6.1 trillion by the end of the third quarter.

At the same time, international liabilities increased by $44.8 billion to $4.9 trillion.

Foreign borrowing has ramped up this year, led by increased federal government debt issuance.

To date, net foreign borrowing totalled $41.8 billion, StatsCan said.

StatsCan also reported that the federal government’s gross external debt grew by $12.2 billion in the third quarter to $576.2 billion.

The third consecutive quarterly increase in external government debt came amid higher borrowing to finance efforts to cushion the economic effects of the Covid-19 outbreak.

This borrowing has pushed external government debt up to 25.8% of GDP from 20.1% at the start of the year.

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James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.