Foreign investors increased their holdings of Canadian securities by $1.9 billion in May, mainly through continued investment in Canadian bonds, Statistics Canada reported Wednesday.

Canadian investors slowed their purchases of foreign securities during May after three months of heavy buying.

For the first time in 2002, foreign investors also acquired some Canadian equities. Foreign investors added $1.3 billion to their holdings of Canadian bonds in May, bringing their investment over the first five months of 2002 to $7.5 billion.

“Foreigners were buyers of Canadian assets for the eighth consecutive month in May, snapping up $1.9 billion of assets. The surge in the Canadian dollar that month was a big driver, as it had its largest monthly gain in three years against the greenback,” says BMO Nesbitt Burns. “This is the first time that foreigners have been net buyers of all three major asset classes since April 2000.”

“With Canadian investors a little more hesitant to bulk up on their portfolio of foreign assets, a net $1.2 billion in capital made its way into the country in May,” observes CIBC World Markets. It notes that the majority of foreign buying was in bonds, where net investment rose $1.3 billion. “May’s increase was driven by corporates, where $2.7 billion in new issues saw non-resident holdings increased a net $1.5 billion.” Foreigners also increased their net holdings of Canadian stocks for the first time this year, although May’s $0.6 billion increase still left the year-to-date disinvestment in stocks at $3.7 billion, it says.

At the same time, Canadian investment in foreign securities slowed, with just $0.6 billion heading overseas, most of it in stocks. “Still, Canadians have gobbled up more than $4 billion of foreign bonds in the year-to-date, easily outstripping the comparable pace for 2001 and on track for a record annual gain.”