Canada’s stability attracts investors

By Vikram Barhat | January 17, 2012 | Last updated on January 17, 2012
2 min read

Foreign investors are snapping up Canadian securities while Canadians are looking elsewhere for diversification and growth, according to the latest Statistics Canada figures.

Persistent uncertainty and slowing global economic growth have led investors to look beyond their home markets; a trend that has greatly benefitted Canada which enjoys a relatively stable financial industry.

Given that both resident and non-residents investors are still jittery about the U.S. economic recovery, the Eurozone crisis and softening emerging markets data, Canada may continue to attract nervous foreign capital.

Non-residents added $88.2 billion worth of Canadian securities to their portfolio in the 11 months ending November 30, 2011, while Canadian investment in foreign securities grew to $14.7 billion for the period.

In what is considered the largest inflow of foreign capital since May, foreign investors bought Canadian securities worth $15 billion in November alone, said the report.

Canadian bond investments—consisting of secondary market purchases of Canadian government bonds and acquisitions of new Canadian corporate bond issues—fetched $6.2 billion in foreign capital in November, while non-resident investment in the Canadian money market increased to $5.7 billion.

Canadian equities received $3.1 billion in non-resident investment in November, led by secondary market purchases by U.S. investors. The month marked the seventh straight month of such investment, and the largest since March.

The activity was spurred by easing stock prices; Canadian equity prices were down 0.4% in November, following a 5.4% increase in October.

Canadian investors bought $2.8 billion of foreign securities in November, evenly split between stocks and bonds. On the fixed income front, Canadians invested $1.6 billion in foreign bonds, mainly those issued by U.S. energy and financial firms. This was the third straight month of investment, although they reduced their holdings of foreign money market instruments by $291 million in the same month.

Looking to diversify while insulating their portfolio from volatility, Canadian investors strengthened their position in foreign equities, adding $1.5 billion to their portfolio—split almost evenly between U.S. and non-U.S. foreign instruments.

Vikram Barhat