Canadians keep shying away from foreign securities

Canadians continued to reduce their holdings of foreign debt at the same time as non-residents shed Canadian securities, Statistics Canada said Monday.

In December, Canadian investors divested themselves of $6.4 billion worth of foreign securities. That's the fourth month that Canadians have reduced their holdings of foreign securities, returning funds to the Canadian economy.

The move is in stark contrast to 20 consecutive years of significant portfolio investment abroad, said Statistics Canada.

Similarly, non-residents reduced their investment in Canadian securities in December by $2.8 billion, removing an unprecedented value of bonds from their portfolios. Still, they continued to significantly adjust their holdings in favour of Canadian short-term instruments for a second month.

Last year marked the first annual divestment in foreign bonds since 1994, with Canadians shedding $16.4 billion in foreign bonds in 2008. Three-quarters of that was divestments in United States government bonds.

The U.S. dollar rose 23 per cent against the Canadian dollar in 2008, while Canadian rates gained ground over U.S. rates in the second half of the year, making Canadian bonds relatively more attractive than their U.S. counterparts, said Statistics Canada.