Foreigners snap up Canada securities in record numbers

Mon Jul 16, 2012 12:16pm EDT
 
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By David Ljunggren

OTTAWA (Reuters) - Foreign investment in Canadian securities hit a record high in May on heavy buying of its higher yielding government debt, a sign of Canada's growing role as a safe haven during global economic turmoil.

Canada, which boasts stronger fiscal and economic fundamentals than most developed Western economies, said non-residents bought C$26.11 billion ($25.60 billion) of stocks, bonds and money market paper in May, well above the previous C$22.88 billion record from May 2010.

That reflected both higher interest rates in Canada and intensifying economic problems elsewhere.

"The strong inflows into Canadian assets happened at the same time as euro zone tensions re-intensified. This strengthens the argument that Canada is gradually becoming a safe-haven," Charles St-Arnaud of Nomura Global Economics said in a research note.

"The majority of the flow was into bonds rather than money-market instruments, signaling that investors are comfortable with Canada's long-term outlook."

AAA-rated Canada emerged from the global financial crisis in better shape than most other developed nations, a draw to investors worried about economic problems in Europe and the patchy U.S. recovery.

HIGHER YIELDS APPEAL

In May, long-term Canadian interest rates exceeded those in the United States by the most since September 2011, Statistics Canada said. At the same time, the Canadian dollar depreciated against the U.S. dollar to the lowest level since September 2011.   Continued...