Global| Nov 17 2004Net Foreign Purchases of Securities in US Market Increase in September; Japanese Pullback Offset by UK, Others
Summary
Net purchases of securities by foreign investors in US markets picked up slightly in September, reaching $63.4 billion, after a dip to $59.9 billion in August. Foreign investor participation in US capital markets is thus running [...]
Net purchases of securities by foreign investors in US markets picked up slightly in September, reaching $63.4 billion, after a dip to $59.9 billion in August. Foreign investor participation in US capital markets is thus running modestly ahead of its record pace in 2003. These data appear in the US Treasury's month Treasury International Capital ("TIC") data and were released yesterday for September. They are contained in Haver's USINT database in the section "US International Investment Tables", shown by security type and country. They cover purchases and sales of securities with maturities longer than one year. Thus, several forms of financing such as short-term paper, trade credit and bank loans, are not included.
Press reports this morning express concern that these foreign investments are not keeping up with the ever widening current account deficit. However, the graph shown here suggests that through the second quarter -- the latest available US current account data -- these capital flows are in fact keeping up. And they have a substantial 88% correlation with the current account over the past 15 years. Through August, however, the US trade deficit appears to be widening for the quarter even as these securities purchases have diminished somewhat from the second quarter. It thus remains to be seen whether the close correlation in these patterns will be maintained; the recent fall in the dollar may suggest a reduced attraction of US markets for foreign investors.
The September data show sharply reduced net purchases of federal agency securities, but increased buying of Treasuries. Further, net buying of corporate bonds picked up sharply. Press reports also express concern that Japanese participation turned negative in September. Indeed, Japanese investors were net sellers of $3.5 billion worth of US securities. However, investors in the UK, Bermuda and Hong Kong, among others, more than made up for the Japanese pullback.
| Net Foreign Purchases of Securities in US Markets (Billions US$) | Sept 2004 | Aug 2004 | Jul 2004 | Last 12 Months Average | Monthly Average|||
|---|---|---|---|---|---|---|---|
| 2003 | 2002 | 2001 | |||||
| Total | 63.4 | 59.9 | 63.0 | 69.5 | 58.2 | 47.9 | 41.8 |
| Treasuries | 19.2 | 14.6 | 22.4 | 31.8 | 23.2 | 10.0 | 1.5 |
| Federal Agencies (mostly "GSEs") | 1.0 | 21.1 | 19.1 | 16.9 | 13.4 | 16.3 | 13.7 |
| US Corporate Bonds | 44.6 | 26.5 | 27.9 | 24.8 | 22.5 | 15.2 | 18.5 |
| US Corporate Stocks | -3.8 | -2.1 | 9.8 | 1.6 | 3.1 | 4.2 | 9.7 |
| Foreign Bonds | 0.3 | -1.7 | -7.3 | -0.3 | 1.9 | 2.4 | 2.5 |
| Foreign Stocks | 2.1 | 1.3 | -8.9 | -5.2 | -5.9 | -0.1 | -4.2 |
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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