Foreigners Buy Record C$26.11B of Canadian Securities in May
16-Jul-2012
By Paul Vieira
OTTAWA--Foreigners purchased a monthly record amount of Canadian securities in May, shattering a two-year benchmark, propelled by a buying spree of Canadian government debt, Statistics Canada said Monday.
Foreign investment in Canadian securities reached a net 26.11 billion Canadian dollars (US$25.73 billion) in May, versus the previous month's C$10.16 billion purchase. The previous record for non-resident investment in Canada was set in May 2010, at C$22.88 billion.
Foreign investors sold off their Canadian holdings in January and March, but the record May result suggests triple-A Canadian securities are back in favor, just as heightened worries re-emerge over the debt and banking crisis in the euro zone.
The May data were driven by a net C$16.67 billion purchase of Canadian bonds, the largest such inflow in this investment class in three years. The bulk of this purchase, at an estimated C$9.5 billion, was done in the secondary market, with debt purchased at both the short- and long-end of the maturity spectrum. These purchases emerged as the spread between Canadian and U.S. long-term interest rates reached its largest gap since September 2011.
Also in favor with foreigners were bonds issued by Canadian government agencies, such as Export Development Canada, with purchases hitting C$3.5 billion in the month. The remainder of the bond inflows were in provincial bonds, mostly those denominated in U.S. dollars.
In addition, foreign investors purchased a net C$7.35 billion in short-term, money-market instruments, mainly in federal government paper. As of the end of May, the data agency said foreign holdings of Canadian money-market instruments had reached a record level of C$69.89 billion.
Capping off the May results was a net C$2.10 billion purchase of Canadian equities, the largest investment since November 2011. The purchases were made as Canadian stock prices declined 6.3% in the month to reach their lowest level in nearly two years.
On the other side of the spectrum, Canadian investors bought C$1.32 billion of foreign securities in May - led by a net C$1.72 billion acquisition of foreign equities, mainly U.S. stocks. The stock purchases were offset, though, by a selloff in foreign money-market instruments. Canadians sold a net C$844 million in short-term paper, and the data agency attributed the result to the largest monthly divestment so far in 2012 in U.S. Treasury bills. Canadians purchased a net C$442 million in foreign government bonds. |
