Global| Feb 15 2006Foreign Investors Slow Net Buying of Securities from US Investors in December
Summary
Foreign investors sharply reduced their net purchases of securities from US investors in December, according to the US Treasury's monthly Treasury International Capital ("TIC") data reported this morning. Foreigners bought $74.16 [...]
Foreign investors sharply reduced their net purchases of securities from US investors in December, according to the US Treasury's monthly Treasury International Capital ("TIC") data reported this morning. Foreigners bought $74.16 billion in US securities from US resident investors, down from $105.70 billion in November. At the same time, they sold $17.56 billion in foreign securities to US investors, making their overall net transactions with US investors $56.60 billion, down from $91.6 billion in November and the smallest amount since May's $56.57 billion.
The TIC data, carried in Haver's USINT database, constitute a sizable body of information about interest in US markets from investors in many countries around the world. In the past, Japan has been the prime region absorbing US bonds and stocks. In the second graph, we show this with the share of Japanese gross purchases of US securities. In the late 1980s and early 1990s, Japan's purchase took about 35 - 40% of total foreign purchases. In more recent years, Japanese investors have reduced their buying. Not surprisingly, China's purchases have picked up. Additional monthly data are available on foreign holdings of Treasury securities and these show that Japan's portfolio has flattened. China's has trended consistently higher, but its Treasury ownership is still a mere fraction of Japan's.
In interpreting these data, it's important to remember that they mark the first transaction between a US investor and a non-US investor. That foreign party may be an intermediary between the American and the final foreign owner. Thus, the UK and Caribbean centers are large purchasers of US securities. But they may not be large "owners". For instance, UK gross purchases of US Treasuries were 9 times as much as those of Japanese investors in 2005, but their holdings of Treasuries at the end of the year were only 34% as much as Japan's. China's holdings are just a little bit larger than the UK's, but they are growing consistently. See the third graph.
| Net Foreign Purchases of Securities from US Investors (Billions US$) | Dec 2005 | Nov 2005 | Oct 2005 | Monthly Averages||||
|---|---|---|---|---|---|---|---|
| 2005 | 2004 | 2003 | 2002 | ||||
| Total | 56.6 | 91.6 | 105.6 | 75.9 | 63.6 | 55.3 | 47.9 |
| Total Domestic Securities | 74.2 | 105.7 | 108.8 | 87.4 | 76.4 | 60.0 | 45.6 |
| Treasuries | 18.5 | 54.5 | 29.2 | 29.2 | 29.3 | 22.0 | 10.0 |
| Federal Agencies (mostly "GSEs") | 9.8 | 9.1 | 34.9 | 18.9 | 18.9 | 13.0 | 16.3 |
| US Corporate Bonds | 37.3 | 37.3 | 36.1 | 32.6 | 25.8 | 22.1 | 15.2 |
| US Corporate Stocks | 8.7 | 4.8 | 8.0 | 6.6 | 2.4 | 2.9 | 4.2 |
| Foreign Bonds | -3.7 | 2.2 | 2.8 | -1.4 | -5.7 | 2.7 | 2.4 |
| Foreign Stocks | -13.8 | -16.4 | -6.0 | -10.1 | -7.1 | -7.4 | -0.1 |
Carol Stone, CBE
AuthorMore in Author Profile »Carol Stone, CBE came to Haver Analytics in 2003 following more than 35 years as a financial market economist at major Wall Street financial institutions, most especially Merrill Lynch and Nomura Securities. She has broad experience in analysis and forecasting of flow-of-funds accounts, the federal budget and Federal Reserve operations. At Nomura Securites, among other duties, she developed various indicator forecasting tools and edited a daily global publication produced in London and New York for readers in Tokyo. At Haver Analytics, Carol is a member of the Research Department, aiding database managers with research and documentation efforts, as well as posting commentary on select economic reports. In addition, she conducts Ways-of-the-World, a blog on economic issues for an Episcopal-Church-affiliated website, The Geranium Farm. During her career, Carol served as an officer of the Money Marketeers and the Downtown Economists Club. She has a PhD from NYU's Stern School of Business. She lives in Brooklyn, New York, and has a weekend home on Long Island.
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