Canada's Net Foreign Asset Position Surpasses C$2 Billion in 2Q

By Paul Vieira

OTTAWA--Canada's net international investment position - or the difference between external assets and external liabilities - rose in the second quarter to surpass, for the first time, 2 billion Canadian dollars, or the equivalent of $1.47 billion.

Statistics Canada said the net international investment position reached C$2.06 billion in the second quarter, an increase of 4.5% from the previous three-month period and a 53% rise from the same year-ago period. Canada's net foreign asset position has constantly grown since the fourth quarter of 2022, largely on the strength of gains in the U.S. stock market.

The data agency said stock-market gains contributed a C$66 billion increase in net foreign assets. About 70% of Canada's foreign assets were held in equities at the end of the second quarter, while Canadian-owned U.S. assets totaled C$1.67 trillion.

A country's net international investment position plays an important role in adjustments to economic shocks, according to Bank of Canada research. However, central-bank research also indicates that foreign financial inflows may also help encourage a buildup of financial system vulnerabilities by fuelling an increase in leverage.

Canada's gross external debt, or the value of Canadian debt instruments held by foreign investors, rose 2.7% to $4.27 trillion at the end of the second quarter, or the equivalent of 142.2% of the gross domestic product - marking a new post-pandemic period high.

The data agency said the rise was driven by foreigners acquiring government of Canada bonds and other debt instruments. In its 2024-25 budget plan, Canada said it intended to issue C$228 billion in bonds, or one of the largest for a one-year period outside of the pandemic.

Write to Paul Vieira at paul.vieira@wsj.com

(END) Dow Jones Newswires

September 11, 2024 09:40 ET (13:40 GMT)

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