Canadian investors disposed of a record $7.4 billion worth of foreign securities in August, liquidating a sizable share of their holdings of foreign money market instruments.

“With the credit crunch and meltdown in the asset-backed finance sector, residents halted investment in foreign corporate paper,” Statistics Canada said.

That caused a sharp reversal from heavy acquisitions of foreign securities averaging $6.3 billion a month since February 2005.

Meanwhile, non-residents disposed of $3.8 billion worth of Canadian securities in August.

Foreign divestment over the month focused on Canadian shares, split almost equally between outstanding shares and share retirements, while non-residents increased their holdings of Canadian bonds.

Canadians divested a record $7 billion of foreign money market paper, a reversal from two straight months of purchases totalling $3.2 billion.

On a currency basis, nearly 82% of August’s reduction was in Canadian dollar-denominated foreign paper.