The trend of significant foreign investment in Canadian securities continued in June, Statistics Canada said Tuesday.

Non-resident investors acquired $10.5 billion in Canadian securities in June, with considerable investments in both federal government debt instruments and equities.

Meanwhile Canadian investors purchased $1.4 billion of foreign securities, all equities, StatsCan said.

The agency says foreign investors bought $5.5 billion of Canadian bonds in June, ending the second quarter with an all-time high foreign investment.

Foreign investment in June was equally split between new bonds and bonds purchased on secondary markets.

The latter focused on federal government bonds as non-residents acquired $5.3 billion, mainly the five-year benchmark bond.

At the same time, non-residents shed $2.4 billion of provincial government bonds on secondary markets, mostly Canadian dollar-denominated issues.

There was a $2.7-billion of foreign investment in Canadian money market instruments in June after two months of divestment. Foreign acquisitions concentrated on federal government paper, almost equally split between Canadian and U.S. dollar-denominated instruments.

In addition, foreign investors bought $524 million of provincial government paper but continued to reduce their holdings of federal government enterprise paper, a trend that began in January 2009.

Foreign demand for Canadian equities increased in June as non-residents added $2.3 billion to their holdings. Foreign investors chose equities across a wide variety of sectors with the exception of the information technology sector.

Canadian stock prices levelled off in June following a strong 30 per cent gain over the previous three months.

Canadians swap bonds for equities

Canadians sold $1.9 billion of foreign bonds in June, as they shed U.S. government bonds from their holdings.

Canadians also disposed of $660 million in foreign money market instruments in June, largely U.S. government Treasury bills. U.S. short-term interest rates remained unchanged while Canadian rates increased in June.

Canadian investment in foreign equities focuses on U.S. shares Canadians returned to buying foreign shares in June, adding $4 billion to their portfolios.

IE