Investors opt for foreign bonds

If corporate Canada truly is being hollowed out by foreign acquisitions, Canadian investors certainly seem willing to balance the effects by buying up foreign securities. In March alone, the Canadians invested $11 billion outside of our home and native land, according to the latest data out of StatsCan.

That drives year-to-date foreign investment to a record $25.7 billion. And why not? The Canadian dollar has been testing highs not seen in 30 years, while foreigners flock to our shores to raise capital through the Maple bond.

Canadians preferred foreign bonds over equities in March, with fixed income instruments accounting for $8 billion of the total, driving year-to-date bond purchases to $16.6 billion. Investors were investing further afield, with 60% of the total value heading into non-U.S. issues.

Maple bonds accounted for two-thirds of that amount, or 40% of the total, with European institutions the dominant issuers. U.S. corporate bond purchases totaled $3.9 billion, with U.S.-issued Maples making up $1.2 billion of that amount.

American government bonds took a hit once again, though, with Canadians selling off $488 million, after a massive February divestment of $3.4 billion.

Foreign equity investments totaled $2.9 billion, marking the sixth month in a row that Canadians increased their foreign holdings. American stocks made up virtually the entire amount, which may be attributable to the slumping U.S. dollar creating a relative discount. Non-U.S. equity investments were negative, with $1 billion in divestments.

Meanwhile, foreign investors sold off $4.2 billion in Canadian equities, with roughly half of that divestment the result of firms being taken over and the shares disappearing from the market.

Foreigners opted for bonds in a big way, however, reversing a trend of sell-offs by buying $9.1 billion in Canadian debt. The split between existing and new bonds was roughly even. Canadian corporations raised $4.6 billion in foreign capital in March, while government bond sales totaled $4.5 billion. American investors were our biggest fans, buying up $5.7 billion in debt.

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