By Akhil Shah

OTTAWA (MNI) – Foreign investment in Canadian securities continued
its uptrend in September, rising by C$7.350 billion after increasing by
C$8.215 billion in August. However, Canadian investment in foreign
securities slowed to C$718 million.

The increase in September brings total foreign acquisitions of
Canadian securities to C$68.769 billion for the year to date and remains
23.2% below the levels seen during the same period last year.

Non-resident investors added C$7.241 billion worth of Canadian
money market paper to their portfolios in September. Purchases of
federal paper worth C$5.3 billion led the increase, in September,
followed by investment in instruments issued by provincial governments
(C$1.3 billion).

In the third quarter itself, foreigners added C$16.2 billion in
money market instruments to their portfolios, surpassing the high of
C$9.9 billion in the fourth quarter of 2008, the agency reported. This
was a result of an increase in new issues of T-bills and occurred at a
time when the spread between long-term and short-term interest rates
were narrowing in Canada, global equities were weakening with
uncertainty being cast over the sovereign debt crisis in Europe.

Foreign investors bought Canadian equities worth C$721 million in
September, improving slightly from the C$597 million acquisition in
August. Despite Canadian stock prices declining 9.0% in September,
marking the seventh consecutive monthly decline, foreign investment in
Canadian equities was up for the fifth straight month. The gain in
September was led by secondary market acquisitions from US investors as
the Canadian dollar dropped below parity against its US counterpart.

After investing C$6.011 billion in August, foreigners divested
C$612 million from Canadian bonds in September. This activity was
concentrated in federal government enterprise bonds, mostly retirements,
reported Statistics Canada. Federal bond holdings were reduced for the
fourth month in a row, led by sales of bonds with short-term maturities.
However, the divestment was moderated by foreign acquisitions of
provincial government bonds on new issues and secondary market
purchases.

Canadian investors continued to increase holdings of foreign equity
in September, adding C$1.337 billion worth to their portfolios, marking
a ninth consecutive monthly gain. Investment in US corporate stocks once
again accounted for the bulk of the gains with prices declined for the
fifth straight month.

Resident investors continued to divest from foreign bonds,
withdrawing an additional C$469 million in September, with the activity
focusing on US corporate bonds. This divestment remained the lowest in
seven months and was offset by the first net acquisition of US
government bonds since February 2011.

Canadian investors also sold foreign money market instruments worth
C$151 million in September, all US T-bills.

— Akhil Shah is a reporter with Need To Know News in Ottawa

** Market News International – Ottawa **

[TOPICS: M$C$$$,MAUDS$]