December Canadian Capital Inflows increase To C$10.2 billion, Record Net Inflows For 2016

Overseas investment into Canadian securities increased to C$10.2bn for December from C$7.3bn the previous month, although inflows were slightly below consensus expectations of C$11.2bn.

For the 2016 as a whole, total inflows increased to C$161.3bn from C$106.0bn the previous year.

Debt securities recorded small-scale inflows for the month with the impact of bond inflows offset by a second successive outflow from money-market instruments with funds leaving both Federal government and corporate instruments.

For 2016, net inflows of debt securities increased to C$107.9bn from C$91.6bn the previous year with the strongest inflows into corporate bonds.

Equity inflows increased to C$9.7bn for the month while 2016 inflows increased to C$53.4bn from C$14.4bn the previous year.

Canadian securities flows overseas reversed sharply in December with outflows of C$6.7bn from a net repatriation of C$8.0bn the previous month.

For the year as a whole, there was still a sharp decline in outflows to C$13.8bn from C$60.2bn previously as investor appetite for overseas assets cooled.

Although equity outflows were relatively stable, there was a net repatriation of bonds after outflows of C$36.3bn in 2015.

Given the increase in inflows and reduced outflows, the net inflow of funds increased to a record high of C$147.5bn and there have been net inflows of C$634bn since 2009.

The data overall will maintain optimism over the short-term balance of payments position with inflows comfortably offsetting the current account deficit. In this context, the strength of net flows should provide net currency support, although there will be the risk of a sustained medium-term increase in coupon and dividend payments overseas which would tend to undermine the balance of payments.

The Canadian dollar weakened fractionally after the data with USD/CAD approaching 1.3100, although this primarily reflected a more fragile tone surrounding risk which curbed demand for commodity currencies.

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Tim is a contributing author to EconomicCalendar.com. He is an economist and has been involved in financial markets for over 20 years as an analyst. He specialises in global economic trends, macro policy and central banks. Extensive knowledge, experience and data mining is used to anticipate trends in equities, bonds and forex with a contrarian slant. He is a graduate of the University of York with a degree in Economics/Econometrics.