UPDATE 2-Foreign buys of Canada securities hit record in May

* Foreign investments nearly triple forecast

* May investment by nonresidents beat April 2004 record

* Canadians sell foreign securities, mainly bonds
(Adds details, commentary) (Read more stock market commentary today.

By Ka Yan Ng

OTTAWA, July 19 (BestGrowthStock) – Foreigners snapped up a record
C$23.16 billion ($22.06 billion) in Canadian securities in May,
nearly double the amount bought the month before, data showed
on Monday, as federal government bonds drew strong investor
interest because of their safe-haven status.

Statistics Canada said the May investment was up from
C$12.36 billion in April and nearly triple the C$8 billion
expected by analysts in a Reuters poll. (ECONCA: )

The total May investment by nonresidents beat the previous
record of C$21.4 billion, set in April 2004, Statscan said.

“The main story is foreigners are still lapping up Canadian
debt securities, in particular government bonds but also
starting to buy money market securities as well,” said Sal
Guatieri, senior economist at BMO Capital Markets.

Foreigners scooped up C$15.2 billion worth of Canadian
bonds in May, the largest investment in a year. Of that total,
C$11.5 billion was invested in federal government bonds as
yields declined to their lowest level since April 2009.

Foreigners added C$5.3 billion of Canadian stocks, to their
portfolios, the biggest investment in shares since September
2009.

They also added C$2.7 billion of Canadian money market
instruments in the month.

Guatieri said the money markets securities were also a draw
because of the wider interest rate spreads that are offered
compared with U.S. rates.

“That trend should continue, given that the Bank of Canada
is expected to raise rates further and the Fed could be on hold
well into next year,” he said.

“When you compare Canada with the U.S. now, you can get a
little higher yield for long term bonds in Canada.”

The Bank of Canada is likely to raise its overnight rate by
25 basis points on Tuesday to 0.75 percent, though market
players will be mindful of the bank’s level of discomfort with
the global risks to Canada’s economic recovery as it looks to
future monetary policy. [ID:nN14133612]

The securities data is broadly in line with recent demand
seen at government bond auctions, which has attracted
international investors. [CA/AUC]

Canada’s solid economic fundamentals and relatively healthy
fiscal picture compare favorably against the sovereign debt
crisis in the euro zone and a patchy recovery in the United
States.

Canadians, for their part, sold C$2.9 billion in foreign
securities in May, the largest repatriation of funds from
abroad since January.

They divested C$5.3 billion worth of bonds, mainly U.S. and
European government bonds. They acquired a further C$2.1
billion in foreign stocks, all in U.S. shares, and also added
C$317 million of short-term money market instruments.

Investing

($1=$1.05 Canadian)
(Additional reporting by Louise Egan, editing by Rob Wilson)

UPDATE 2-Foreign buys of Canada securities hit record in May