Increased government borrowing in Canada and in the United States, along with declining global equity prices, maintained cross-border portfolio investment activity in February, according to data released Monday by Statistics Canada.
Foreign investors added $6.1 billion of Canadian securities to their portfolios, investing in both bonds and equities. For their part, Canadian investors acquired $2.9 billion of foreign securities with acquisitions comprised of equity and money market instruments.
The overall supply of Canadian federal government debt remained high, in line with the previous four months, but was mainly comprised of long-term instruments in February. As a result, non-residents acquired $1.1 billion of federal government bonds, mainly 5-year and 10-year benchmark bonds. Foreign investment in Canadian corporate debt also focused on long-term instruments. Non-residents picked up $2.0 billion of new government business enterprise bonds as well as $1.4 billion of new issues of private corporations.
In contrast, non-residents reduced their holdings of Canadian money market instruments by $482 million in February, the first divestment in nearly a year. Foreign divestment was driven by activity in government business enterprise and private corporate short-term paper, mainly bank paper. Foreign acquisitions of Canadian Treasury bills were also down sharply from January, reflecting much lower net new issues in February.
Foreign investors acquired $2.4 billion of Canadian equities in February, favoring gold and oil companies. On the other hand, non-residents reduced holdings of shares of information technology and financial firms, which were among the worst performing sectors of the Standard and Poor's / Toronto Stock Exchange index in February. By month-end, Canadian stock prices reached their lowest level since November 2003.
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