December 17, 2012 / 8:08 PM / 6 years ago

October foreign buying of Canada securities third highest in 2012

OTTAWA (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, nearly all of it accounted for by bonds and predominantly those in the 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.

In October, foreigners bought C$15.49 billion in bonds, led by C$8.93 billion in private Canadian corporate bonds, mainly new bonds in U.S. dollars and placed in the United States, the federal agency said.

The private corporate bond purchases were the largest since C$9.19 billion in November 2001 and were marked by significant overall net new issue activity.

Foreigners dumped C$2.97 billion in money market paper and bought C$745 million in Canadian equities in October, focused on oil and gas firms.

Canadians halved their purchases of foreign securities to C$3.19 billion from C$6.03 billion in September. Almost all of it, C$2.89 billion, was in bonds.

Reporting by Randall Palmer; Editing by Jeffrey Hodgson

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