Foreign investors reduced their holdings in Canadian securities by C$2.1B in March as Canadian investors acquired C$7.8B in foreign securities, most in five years: Statistics Canada
May 17, 2012
– Foreign investors reduced their holdings of Canadian securities for the second time in three months as they divested $2.1 billion in March, led by debt instruments. Canadian investors acquired the largest amount of foreign securities in nearly five years at $7.8 billion, with investment concentrated in equities.
Non-residents reduce their holdings of Canadian debt securities
Foreign investors removed $1.5 billion from their holdings of Canadian money market instruments in March, marking a third straight month of divestment. This activity was again concentrated in Canadian Treasury bills, with non-residents reducing their holdings by a further $3.1 billion. These reductions were partially offset by foreign acquisitions of federal and provincial government enterprise paper.
In the first quarter of 2012, non-residents reduced their holdings of Canadian short-term paper by $7.7 billion. This reduction was in contrast to investment amounting to $31.2 billion over the previous three quarters.
Non-resident investors also reduced their holdings of Canadian bonds by $897 million in March, following a $13.7 billion acquisition in February. The reduction was focused in federal bonds, reflecting both retirements and sales on the secondary market. Divestments were moderated by non-resident acquisitions of federal government enterprise bonds. Canadian long-term yields rose 14 basis points during the month, while their US equivalent increased by 23 basis points.
Foreign investors acquire Canadian equities at a slower pace
Non-residents acquired $288 million of Canadian stocks in March, down from a $445 million purchase in February. Investment was driven by US purchases of energy shares. Redemptions of Canadian shares as a result of foreign merger and acquisition activity moderated the portfolio inflows over the month. Canadian stock prices were down 2% in March, offsetting the gains in February.
Canadians resume their investment in foreign equities
Canadian investors purchased $6.4 billion of foreign equities in March, led by demand from pension funds. This was the strongest investment since April 2007, and US shares accounted for over 60% of the March investment. US stock prices increased for a fourth straight month in March to their highest level since December 2007.
Canadian investors purchased $1.6 billion of foreign bonds in March after divestments in the previous two months. The investment was concentrated in non-US foreign bonds, mainly debt instruments from European countries and Australia. Canadians also invested in US Treasury bonds for the first time in 2012. However, they reduced their holdings of foreign money market instruments by $172 million in March. This was the fifth straight divestment in these instruments with activity in the month concentrated in foreign bank and sovereign paper.