Foreign investors unexpectedly reduced their holdings of Canadian securities by $2.1-billion in June, Statistics Canada said Thursday.
Economists polled by Bloomberg News had expected the reverse: that investors had bought $2.1-billion worth of securities for the month.
“After purchasing the largest amount in Canadian bonds thus far in the year in May, foreign investors reduced their holdings in June,” Statscan said. Non-resident holdings of Canadian bonds fell by $1.2-billion in June, the largest divestment in the sector since February 2004, it added.
The Canadian dollar fell to 82.02 cents (U.S.) after the report, its lowest level since July 29, from 82.43 cents on Wednesday.
Canadian investors, meantime, bought $5.4-billion (Canadian) of foreign securities in June. So far this year, Canadian investors have bought $16-billion worth of foreign securities, much more than the $7.1-billion in the same period last year. The move comes after the federal budget in February eliminated foreign content limits in tax-deferred Canadian investment vehicles.
“All that is happening is exactly what had been expected -- a gradual, rational and controlled realignment in portfolio holdings by institutional investors that were not terribly far from most estimates of the optimal foreign content to their portfolios before the lifting of the limit came into effect,” said Derek Holt, assistant chief economist at RBC Financial Group.
Investment was spread across all types of securities, with foreign bonds receiving the most at $2.3-billion. More than three-quarters of the investment in foreign bonds went into U.S. treasuries with the rest going into overseas bonds.
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