../Morning Post
Posted January 17, 2011

Canada's international transactions in securities

Statscan - Strong foreign acquisitions of Canadian securities continued in November as non-residents added a further $8.0 billion to their portfolios, again focusing on bonds. Canadian acquisitions of foreign securities reached an eight-month high of $5.8 billion in November, led by the largest investment in foreign bonds since March 2007.

Foreign investment in Canadian bonds Continues
Foreign purchases of Canadian bonds remained robust at $7.1 billion in November, marking the 23 consecutive month of investment in these instruments. Investment activity in November was split between new bonds and acquisitions on secondary markets, with more than half in corporate bonds.

Non-residents added $2.4 billion of new private corporate bonds to their portfolios, mainly instruments denominated in US dollars. In addition, their investment in new federal government enterprise bonds strengthened to $1.6 billion and reflected a variety of currencies. Foreign investors' purchases on secondary markets were mainly comprised of federal government bonds (mainly the two-year benchmark bond), with holdings up by $3.2 billion in November. However, foreign holdings of provincial government bonds edged down, marking the first reduction since March.

Non-residents also acquired $836 million of Canadian money market instruments in November. This activity was led by a $1.3 billion investment in provincial government paper, following 10 months of divestment. This was partially offset by a reduction in non-residents' holdings of foreign currency paper issued by the federal government and its enterprises.

Foreign acquisitions of Canadian stocks slow

Investment in Canadian stocks slowed to $115 million in November, following two months of heavy investment totalling $6.3 billion. New issues by Canadian mining and energy firms accounted for all foreign inflows over the month, while activity on secondary markets resulted in a small foreign divestment. Canadian equity prices continued to trend up in November, rising 2.2%.

Canadian acquisitions of foreign securities focus on US government bonds

Canadian investors added $7.5 billion of foreign bonds to their holdings in November, with three quarters of it US government bonds. This was the largest such investment in foreign bonds since March 2007, just before the onset of the recent financial crisis. Purchases of US government bonds were an unprecedented $5.7 billion in November, following significant divestments in the last two years. Investment in November focused on the seven-year benchmark bond and was widespread across Canadian institutional investors. These same investors also acquired US corporate bonds, due to new issue activity in the maple bond market as well as non-US foreign bonds, mainly bonds indexed to inflation.

Canadians, however, withdrew $1.2 billion from their holdings of foreign money market instruments in November. Large retirements of US government Treasury bills completely offset October's purchases. Canadian short-term interest rates exceeded their US counterparts in November by the largest margin since November 2008.

Canadian investors further reduce their holdings of foreign stocks

Canadians removed $499 million from their holdings of foreign stocks in November, amounting to one-half of October's divestment. Net sales of non-US foreign stocks reached a four-month high of $1.5 billion, as Canadian pension funds removed sizeable amounts of Asian equities from their holdings. This activity was partially offset by acquisitions of US stocks, as US equity prices edged down 0.2% after two months of gains.

1. Cumulative transactions.
2. Interest accrued less interest paid.
A minus sign indicates an outflow of money from Canada, that is, a withdrawal of foreign investment from Canada or an increase in Canadian investment abroad.

Note to readers

All values in this release are net transactions unless otherwise stated.

The data series on international security transactions cover portfolio transactions in stocks, bonds and money market instruments for both Canadian and foreign issues.

Stocks include common and preferred equities, as well as warrants.

Debt securities include bonds and money market instruments.

Bonds have an original term to maturity of more than one year.

Money market instruments have an original term to maturity of one year or less.

Government of Canada paper includes Treasury bills and US-dollar Canada bills.

Submit press release to pressrelease@exchangemagazine.com - Editor Jon Rohr - Content published on this site represents the opinion of the individual/organization and/or source provider of the Content. ExchangeMagazine.com is non-partisan, online journal. Privacy Policy. Copyright of Exchange produced editorial is the copyright of Exchange Business Communications Inc. 2010/*.*. Additional editorials, comments and releases are copyright of respective source(s) and/or institutions or organizations.

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