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Foreign investors bought more Canadian bonds in October, producing monthly portfolio inflows that outweighed the entire third quarter, Scotia Economics reported.

Statistics Canada announced that net securities inflows reached $9.3 billion in October, which was the largest monthly inflow since January.

Foreign investors added $11.3 billion in Canadian securities during the month, and Canadian investors bought $2.0 billion in foreign securities.

“This marks the third consecutive month of net positive securities inflows into the Canadian economy, shifting the negative trend we saw in late summer into positive territory,” Scotia said in its report.

Foreign investors primarily focused on provincial debt and corporate bonds, and curbed their Canadian equity holdings.

“Geographically, the lion’s share of investments came from the EU, about $10.8 billion in total, driven by a search for yield,” Scotia said.

Canadian investors also added foreign bonds in October, but reduced their foreign equities investments.

“Canadian holdings of foreign equities overall has decreased by $13.5 billion in 2019,” Scotia noted, “with the majority of the decline centred in the U.S.”

Over the same period, Canadian investors have added $27.0 billion in foreign debt holdings, “more than offsetting equity divestitures,” Scotia added.

Scotia expects Canadian investors to return to U.S. equities in the months ahead. “Given that U.S. consumer and business indicators are consistent with early cycle growth, we would expect Canadian allocations to U.S. equities to pick up further in the coming months,” it said.