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Canadian investors embrace global market opportunities

Sales of securities and mutual funds show sentiment switching overseas


Canadian investors are going global, shaking off a love of their home and native land and snapping up foreign securities and mutual funds at a heady pace.

Meanwhile, foreign takeovers of Canadian firms have overseas investors dumping Canada from their portfolios as well.

October saw strong acquisitions of foreign securities by Canadian investors, the continuation of a trend dating back to February of 2005, Statistics Canada reported yesterday.

Canadian investors bought $6.8-billion worth during the month, with foreign bonds accounting for more than 80 per cent of the total value. So far in 2006, purchases of foreign securities have totalled $68.5-billion, surpassing the record annual purchase of $63.9-billion in 2000.

Close to half of October's purchases went to buy so-called maple bonds -- Canadian-dollar denominated foreign bonds. Of the $2.7-billion in maple bonds bought, more than 80 per cent were issued by overseas issuers, and the remainder by U.S. corporations, Statscan said.

Foreign investors, meanwhile, continued to trim their Canadian holdings.

About $5.4-billion in Canadian shares were sold in October, double the $2.7-billion unloaded in September. Merger and acquisition activity in Canada reached a record high of $90.3-billion in the third quarter, with many foreign firms swallowing some of this country's best-known companies. On Oct. 24, Brazil's Companhia Vale do Rio Doce closed its $19.9-billion acquisition of nickel giant Inco Ltd.

"A lot of the companies that were Canadian companies that were driving the cycle are no longer Canadian," said Joe Canavan, chairman and chief executive officer of Assante Wealth Management Ltd. He expects global equity markets will become increasingly important to Canadian investors.

Canada is "a good place to live and a good place to have some of your money but, looking out, you've got to feel a little bit more inclined to the global equity markets," Mr. Canavan said.

Recent sales figures show mutual fund investors are shifting sentiment overseas. In November, Canadians bought $1.6-billion of foreign equity funds, making that asset class the month's top seller, the Investment Funds Institute of Canada reported on Dec. 15. It's the third straight month of net sales for an asset class that reported net redemptions of $285.6-million in August.

Longer-term sales figures indicate a greater trend is in place. As of Nov. 30, Canadians had bought about $5.8-billion in foreign funds compared with redemptions in the asset class of $5.4-billion for the same 11-month period in 2005.

In February last year, the federal government ended the 30-per-cent cap on foreign content held in retirement savings and pension plans, and opened the door to international markets. The fund industry has responded with a flood of global offerings.

"We see good value in the international markets for Canadian investors," said Paul Taylor, chief investment officer of BMO Harris Private Banking. In November, the high net worth group launched two new international market portfolios.

Canada's strong currency and its long-running bull market in stocks mean that "tactically and strategically, it is an opportune time to have a more significant allocation outside of North America," Mr. Taylor said.

Foreign equity funds

2006Net sales ($-millions)
Grand total5,773,034



© 2007 The Globe and Mail. All rights reserved.

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