(September 29 – 17:25 ET) – The unrelenting leadership of U.S. securities markets has been fueled in part by strong attention from foreign investors.

The Securities Industry Association reports that foreign investors plowed $229 billion into U.S. securities during the first six months of this year. If the demand continues, foreign investment will easily surpass 1997’s record of $387.9 billion. (All amounts are in U.S. dollars).

Stocks make up the lion’s share of the $229 billion, accounting for about $90.1 billion, while U.S. Treasuries have fallen out of favour. Foreign investors were the third largest purchasers of U.S. stocks between 1997 and June 2000, trailing only U.S. mutual funds and life insurance companies.

Oil-rich nations have been leading the way, with countries belonging to OPEC on pace to buy a record $26 billion in U.S. securities. As oil prices remain high, the SIA expects this trend to continue. By contrast, U.S. investor interest in foreign stocks was “lukewarm” during the first six months, with acquisitions totalling $8.6 billion.

As for Canadians, we put a lot more our money in their markets than they did in ours. U.S. investors bought just $257 million in Canadian securities in the second quarter, down sharply from $3.5 billion in the first quarter. In the second quarter, $1.5 billion went into Canadian stocks from U.S. investors, down sharply from $3.6 billion in the first quarter, and barely enough to offset the $1.2 billion of bonds that were sold in the second quarter.

By contrast, Canadian investors bought about $5.1 billion of U.S. securities in the second quarter, down slightly from $6.1 billion in the first quarter. Just $797 million went into stocks and gross trading activity slumped from $71 billion to $67 billion. Agency paper accounted for the bulk of the buying, more than $2 billion worth, with $1.4 billion going into government bonds and T-Bills, and another $895 million into U.S. corporates.

Canada was the fifth largest buyer of U.S. stocks through the first half, far behind the U.K. and Bermuda, and just trailing France and Holland.
-IE Staff