The only economic data out this morning detailed Canada’s international securities transactions in December. Statistics Canada reported that non-resident investors cut their holdings of Canadian securities by $380 million during the month.

Investors sold $2.6 billion worth of bonds and bought $1.3 million worth of money market paper and stocks in December. “The fact that Canada is perhaps the only country in the G-10 to be seriously considering rate hikes in the near future appears to have caught the eye of international investors,” says RBC Financial.

At the same time, Canadians decreased their holdings of both foreign stocks and bonds in December by a total of $603 million following an increase of $6.1 billion in November. Canadians reduced their holdings of global equities in December by $196 million.

“The Canadian love affair with foreign stocks continues to fade,” notes BMO Nesbitt Burns. “This trimmed net purchases for all of 2002 to $18.5 billion, roughly half of the prior year’s outflow and about a third of the record set in 2000. On balance, Canadians purchased $6.8 billion more of foreign securities than foreign investors purchased of Canadian securities last year, precisely in line with 2001.”

“Despite the flurry of interest near the end of the year, foreign investors reduced their holdings of Canadian equities for all of 2002 by $1.8 billion, the first annual net sell-off since 1995,” says Nesbitt.

“In contrast, non-residents increased their holdings of Canadian bonds last year by $15.8 billion – the second highest inflow in the past six years, but still well below the $25 billion average annual inflow in the peak 1991-95 period. Widening short-term Canada/U.S. spreads also prompted the $3.9 billion net buying of Canadian money market paper by foreign investors last year, the biggest inflow since 1993.”

“With the dust having settled on 2002, the full-year results show Canada with a net portfolio outflow of $6.9 billion. That’s on par with the prior year’s result and marks the fourth straight year of net outflows,” comments CIBC World Markets. “Still, with yields having recently swung in Canada’s favour, portfolio flows are beginning to chart a new pattern. Indeed, over the past three months, Canada has witnessed a net inflow of $6.6 billion, the strongest three-month tally in a year and key reason behind the Canadian dollar’s recent appreciation.”

Financial markets will pay little attention, if any, to today’s data RBC says, as investors await the release of much more important data later this week.