UPDATE 2-Oct foreign buying of Canada securities 3rd highest in 2012

Mon Dec 17, 2012 3:04pm EST
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* Foreigners acquire C$13.26 bln in Canadian securities

* Purchases of corporate bonds highest since Nov 2001

* Canadians halve their purchases of foreign securities

* Safe-haven status draws investment - at a cost

OTTAWA, Dec 17 (Reuters) - Foreigners added a net C$13.26 billion ($13.39 billion) to their holdings of Canadian securities in October, the third largest amount this year, nea rly all of it ac counted for by bo nds and pre dominantly tho se in t he corporate sector, Statistics Canada said on Monday.

The investment by foreigners was down slightly from C$14.12 billion in September, upwardly revised from an early estimate of C$13.92 billion. So far this year, foreigners have acquired C$76.16 billion, up from C$74.21 billion in the same period in 2011.

"International interest in Canadian securities is well known and reflects both a fundamentally healthier economy and superior fiscal position," TD Securities chief Canada macro strategist David Tulk said in a note to clients.

"The emergent status (of the Canadian dollar ) as a safe-haven currency was reinforced recently by the IMF which will now track the allocation of official foreign exchange reserves to the Canadian dollar ... This interest, however, does come at a cost for the wider economy."

Tulk noted that foreign inflows had propped up the Canadian dollar, making it harder for exporters to contribute to economic growth. He said these flows also helped drive down bond yields, encouraging households to increase borrowing, which resulted in a more unbalanced economy.   Continued...