Canadian investors had $547.4 billion worth of foreign securities in their portfolios at the end of 2005, twice the size of foreign investments they held eight years ago, Statistics Canada reports.

Canadian holdings of foreign securities increased by 19% in 2005 and were driven by growth in holdings of foreign debt securities, it reported. Gains realized due to the appreciation of foreign asset prices and acquisitions of foreign securities were partly offset by a stronger Canadian dollar, which gained ground against all its major counterparts in 2005, Statscan added.

Foreign portfolio investment totaled $445.6 billion in the form of equities and $101.9 billion in the form of debt instruments at the end of 2005. Equity investment accounted for more than 80% of total foreign portfolio investment in 2005. While equities still dominate, Canadians have been steadily diversifying toward debt instruments since 2001 when debt represented just 10% of holdings, it said.

Canadian portfolio investment abroad was mainly in U.S. securities. “However, an increasing access to international financial markets, combined with the elimination of the foreign property limit and the emergence of developing economies, provided more opportunities for Canadians to diversify their portfolios,” it pointed out.

“Consequently, the share of investment in US. securities went from 60% in 2002 to 54% in 2005. In terms of equity investments, US stocks fell to 51% at the end of 2005 as opposed to 59% three years earlier. Europe, the Caribbean and the Asia and Oceania region all gained a greater share of Canadian portfolio investment in equities during this period.”

Portfolio investment in U.S. and European securities grew at a solid pace of 18% and 16% respectively in 2005. However, the largest growth came from investments in South and Central America (35%) and in Asia and Oceania (33%).

“After a period during which investments of Canadians declined between 2000 and 2002, and remained flat in 2003, investments in South and Central America rebounded in 2004 and 2005, driven by the growth in Brazilian securities which almost doubled,” it noted.

The value of investments in Asia and Oceania increased strongly in 2005, mainly in South Korea, Taiwan and New Zealand, all posting growth of about 60%. Significant gains were also recorded in Japan, India and China, with 30% to 40% increases.

Portfolio investment abroad was spread over more than 85 countries, but there was still a high concentration of assets in a limited number of countries at the end of 2005, Statscan said. The top five countries accounted for over three-quarters of the total investment in foreign securities while the top 10 countries accounted for over 85%. Britain, France and Germany together accounted for 60% of all European holdings.

The top five destinations in 2005, in order of importance, were the U.S., Britain, Japan, France and Germany. Switzerland replaces Germany as the fifth most popular destination when considering equity investment only.