Canadian investors sold $12.3 billion of foreign securities in October, the largest divestment on record, Statistics Canada said Thursday.

The selloff took place against a backdrop of rapidly deteriorating global financial conditions on credit and equity markets.

U.S. equity prices fell a further 17% in October, on the heels of a 9% decline in September.

“In addition, domestic demand for foreign securities was likely adversely affected by the Canadian dollar posting its largest monthly depreciation against the U.S. dollar in more than half a century,” StatsCan said.
Canadian divestment was widespread in October, covering all types of foreign portfolio instruments. “Part of the proceeds were likely placed in Canadian liquid short-term instruments, with Treasury bill issues up strongly in the month,” StatsCan said.

Canadian divestment of foreign bonds continued with the sale of $6.2 billion in October — the largest disposal of such securities to date. This activity was focused on U.S. government bonds for a second consecutive month and was largely accounted for by bonds with a term to maturity of 5 to 10 years.

The balance of the divestment was in non-US bonds and amounted to $1.7 billion, mainly reflecting retirements of maple bonds.

In contrast, foreign investors’ demand for Canadian securities rebounded in October, following three consecutive months of divestment.

Foreign portfolio investment reached $2.8 billion and was dominated by the acquisition of Government of Canada bonds on secondary markets.

IE