Canada enjoys foreign investment surplus

(October 18, 2004) Foreign investors gave the Canadian economy a vote of confidence in August, purchasing $897 million in net securities, despite a “substantial” sell-off in money market instruments, according to the latest report from StatsCan.

At the same time, Canadian investors unloaded $1.1 billion in foreign securities, with a roughly even split between equities and bonds.

Foreign investors dumped $1.9 billion in money market paper, with $1.8 billion of that sold by Americans, as the cross-border short-term interest rate gap narrowed to 0.65% in August.

But not all of our fixed income securities fell out of favour, as foreign investors snapped up $2.2 billion in corporate bonds, with a preference for new issues of U.S. dollar bonds issued in the U.S. market.

In the first eight months of 2004 alone, foreign investors picked up $10.5 billion worth of Canadian bonds, compared to just $3.7 billion purchased over the same period in 2003.

Sales of Canadian stocks were slightly lower in August, but were still quite positive at $587 million, compared with $640 million in July. New issues were particularly popular with $660 million in sales, while $73 million in outstanding shares were sold off.

Canadians turned around and sold off $1.7 billion in U.S. Treasuries, reducing foreign bond ownership by $601 million. A strong interest in non-U.S. overseas bonds saw a record purchase of $1.1 billion. At the same time, however, Canadian investors unloaded $882 million in foreign stock, but purchased $374 million in U.S. equities, resulting in net sales of $509 million in foreign equities.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com