Foreign investors made a record $425.6 billion in net purchases of U.S. stocks and investment fund shares in the second quarter, according to newly released data from the U.S. Bureau of Economic Analysis.
The quarterly inflow was the largest in the BEA’s historical series, which extends back to 1999, according to an analysis of the agency’s data. The figure underscores the scale of overseas demand for U.S. equities and investment funds during the April-through-June period.
The BEA released the data on September 24 as part of its second-quarter international transactions and investment position report. The agency said U.S. liabilities to foreign residents increased by $978.9 billion during the quarter, with portfolio investment accounting for a particularly large portion of the increase.
The $425.6 billion figure represents net purchases, meaning purchases of U.S. stocks and investment fund shares by foreign investors after accounting for sales. It therefore measures the net flow of capital into these U.S. equity-related assets during the quarter rather than the total value of all foreign buying activity.
The record equity inflow occurred alongside a sharp increase in the overall value of U.S. financial assets and liabilities. BEA said U.S. assets rose by $3.72 trillion during the second quarter, while U.S. liabilities increased by $4.87 trillion. Price changes accounted for much of those changes, with U.S. asset prices adding $3.03 trillion and liability prices adding $3.95 trillion.
The foreign investment figures are part of a broader expansion in cross-border financial activity during the quarter. BEA reported that transactions increased U.S. residents’ foreign financial assets by $663.3 billion and increased U.S. liabilities to foreign residents by $978.9 billion, producing net financial-account transactions of negative $369.7 billion.
The strong foreign demand for U.S. equities also came as the country’s overall external position deteriorated. BEA reported that the U.S. current-account deficit widened to $246.0 billion in the second quarter from a revised $212.6 billion in the first quarter. The second-quarter deficit was equivalent to 3.0% of current-dollar gross domestic product.
The widening current-account deficit reflected a larger goods deficit, partly offset by smaller deficits in primary and secondary income. Exports of goods and services and income received from foreign residents increased by $58.8 billion to $1.44 trillion, while imports and income paid to foreign residents rose by $92.2 billion to $1.69 trillion.
At the end of June, the United States had a net international investment position of negative $22.42 trillion, compared with negative $21.27 trillion at the end of March. U.S. residents held $46.97 trillion in foreign financial assets, while foreign residents held $69.39 trillion in U.S. assets.
The record quarterly equity inflow does not by itself identify why foreign investors increased their purchases. The BEA data measure the transactions but do not attribute them to particular investment strategies, countries or market themes. The figures nevertheless show that foreign net demand for U.S. stocks and investment funds reached an unprecedented quarterly level in the second quarter.
The second-quarter data are preliminary and are scheduled to be superseded when BEA releases its third-quarter international transactions and investment position figures on December 18. Until then, the $425.6 billion reading represents the latest official measure of foreign net purchases of U.S. equity and investment-fund assets.
