Showing posts with label Investing. Show all posts
Showing posts with label Investing. Show all posts

Safety first: Foreign investors bond with Canada

An assortment of United States coins, includin...Image via Wikipedia

DAVID PARKINSON | Columnist profile | E-mail
From Saturday's Globe and Mail

Canadian investors have long been accused of being homers. As the rest of the world has been telling us lately, that might not be such a bad thing.
Despite the elimination of foreign-content restrictions on registered retirement savings plans six years ago, most Canadians still keep the vast bulk of their investments in domestic securities. A recent study showed that even the country’s wealthiest investors – those with more than $250,000 to invest – average only 15 per cent of their portfolios in overseas holdings.

MORE RELATED TO THIS STORY


But while investing experts have been telling us for years that we should be looking beyond Canada, data this week from Statistics Canada highlighted that foreign investors have increasingly been flocking to Canada. Foreign buyers snapped up a net $15.4-billion of Canadian securities in May, adding to a year that is shaping up as another big one for foreign buying of Canada’s stock and bond markets.
Seeing as most of us – for better or worse – have most of our money in the Canadian market anyway, it might be worthwhile taking a closer look at what those investing tourists in our country have been buying.
Destination of choice
Warren Lovely, head of macro strategy at CIBC World Markets, broke down Statscan’s data in a report this week to get a better sense of where the foreign money has been flowing.
While equity purchases are up significantly for the year to date, bonds have increasingly replaced equities as the destination of choice for foreign buyers – punctuated by a big surge in bond buying in May, particularly in federal government and federal Crown corporation bonds.
The impetus may be the deterioration of the government debt situation in Europe and the United States, which has fuelled a flight to safe, high-quality bond markets such as Canada. At the same time, it has convinced investors to step back from so-called “risk assets,” such as equities. Canada is being perceived as a low-risk market in risky times, and government bonds are the lowest-risk option for investors.
Crowning your portfolio
One particularly interesting trend has been the sharp gains in buying of bonds issued by federal Crown corporations. Mr. Lovely said that as big foreign buyers such as central banks have become more comfortable with Canada, they have begun to move past the federal government debt to buy high-quality Crown issues such as Canada Mortgage Bonds – which carry the same top-notch credit rating but offer higher interest rates.
“It’s yield enhancement without erosion in credit quality,” he said – adding that this same logic makes sense for smaller retail investors, too.
“There is a very strong argument that this could be a diversification tool for investors of all stripes.”



PIMCO bond king Bill Gross has Canada in his sights

The floor of the New York Stock Exchange.Image via Wikipedia
David Parkinson
Globe and Mail Update
The world’s biggest private-sector bond investor says the U.S. Federal Reserve Board is doing about all it can reasonably do to backstop the struggling U.S. economy and stave off deflation. But America’s government, despite $1-trillion (U.S.) of stimulus spending, isn’t doing nearly enough.
And until it comes up with some new solutions, Bill Gross says, his investment eyes will continue to wander to greener pastures – including Canada.
“We’re much more in awe of countries such as Canada, with a decently balanced budget, and with low debt-to-GDP, and with financial institutions that have been solvent and sound and conservative in their lending, and that have something to export,” said Mr. Gross, founder and co-chief investment officer of Pacific Investment Management Co. LLC (commonly known as PIMCO), which oversees more than $1.1-trillion (U.S.) in investment assets, primarily in the bond markets.
“North of the border has become, while not our favourite destination, certainly a preferable destination to what we see in the United States.”

Mr. Gross declined to say whether his bearish views are translating into a reduction in PIMCO’s exposure to U.S. government bonds – indeed, as recently as June his funds’ holdings of Treasuries were on the rise and at eight-month highs. However, he has been raising his exposure in Canadian and Brazilian government bonds, and his favoured investment strategies right now are outside the U.S. market.
“Investors, whether it’s equity or bonds, should be oriented toward growth and stability, and, yes, a political foundation that promotes both.
“I’ve mentioned Brazil, and, yes, Canada’s a good place. Even Mexico has better initial conditions in terms of low debt than the United, States, but admittedly the stability issues and politics are a question. But in general, the developing world is in much better position than the developed world, so that’s where dollars should go.”




Enhanced by Zemanta

Leave us a message

Check our online courses now

Check our online courses now
Click Here now!!!!

Subscribe to our newsletter

Vcita