|
International buying of US assets increase { June 2007 } Original Source Link: (May no longer be active)
http://www.bloomberg.com/apps/news?pid=20601103&sid=aLiWbzUYzdP8&refer=ushttp://www.bloomberg.com/apps/news?pid=20601103&sid=aLiWbzUYzdP8&refer=us
International Buying of U.S. Assets Jumped in May (Update6)
By Kevin Carmichael
July 17 (Bloomberg) -- International buying of U.S. financial assets unexpectedly climbed to a record in May as investors snapped up American stocks and corporate bonds.
Total holdings of equities, notes and bonds climbed a net $126.1 billion, from $80.3 billion the previous month, the Treasury said today in Washington. Economists predicted foreign investment would slow to a net $73 billion, based on the median estimate in a Bloomberg News survey.
The appetite for U.S. assets rose in the second quarter from the first, when the economy expanded at the slowest pace in four years. Private and government reports showed manufacturing and export gains are propelling growth as housing slumps. The purchases offset diversification by China of its foreign- exchange reserves, as the nation sold Treasuries for a second month.
``The breadth and depth of U.S. markets help it attract capital,'' particularly from emerging markets and oil exporters flush with cash from trade surpluses, said Joe Quinlan, chief market strategist at Bank of America Corp.'s investment strategy group in New York. Foreign investors ``still have confidence'' in the U.S. economy, he said.
China, South Korea and Taiwan sold Treasuries in May, the report showed. Central banks are diversifying reserves to seek higher returns and reduce their links with the dollar. Since May, Iran has asked Japan's refiners to switch to paying for oil in yen, rather than dollars. Kuwait on May 20 abandoned its currency's peg to the dollar.
Drop Since May
The U.S. currency, which rose in May, has since dropped amid concern that losses on debt backed by subprime mortgages will cascade through Wall Street. The dollar was little changed after the report, trading at $1.3782 per euro at 12:05 p.m. in New York. It reached a record low of $1.3814 on July 13.
Including short-term securities such as Treasury bills and non-market trades such as stock swaps, foreigners bought a net $105.9 billion of U.S. securities in May, up from $97.8 billion.
The Treasury's reporting on long-term securities captures international purchases of U.S. government notes and bonds, stocks, corporate debt and securities issued by U.S. agencies such as Fannie Mae and Freddie Mac, which buy mortgages.
Private foreign buying of American equities and corporate debt soared to a record in May. International purchases of U.S. stocks jumped a net $41.9 billion, compared with $27.4 billion in April. Foreigners bought a net $72.6 billion of corporate bonds, compared with $33.5 billion in April.
Stock Gains
U.S. stock indexes set records in May as economic data suggested the housing slump hadn't spread to other parts of the economy. The Dow Jones Industrial average climbed 4.3 percent in May. Private surveys of purchasing managers showed accelerating manufacturing and services growth and the government reported that unemployment hovered close to a six-year low.
``Foreign investment into U.S. equities is consistent with the rise of equity prices to record highs,'' said Michael Woolfolk, a senior currency strategist at Bank of New York in New York.
The U.S. economy grew at an annual rate of 0.7 percent in the first quarter, the weakest since the fourth quarter of 2002. Many economists expect a rebound this quarter -- to an annual rate of 3 percent, according to the median estimate of 69 analysts surveyed July 2 to July 9.
U.S. investors bought a net $37.3 billion of overseas assets in June, compared with $17.1 billion the month before.
International demand for Treasuries increased by $21.6 billion, compared with $376 million in April. The yield on the benchmark 10-year note averaged 4.74 percent in May, compared with 4.69 percent in April.
Agency Debt
Purchases of agency debt slowed to a net $27.5 billion after a $36.1 billion net gain in April.
Private investors bought a net $152 billion in May, an all- time high, compared with $72.1 billion of U.S. securities in April. Official purchases, including those by central banks, increased by $11.5 billion, compared with a net gain of $25.3 billion last month.
Some economists say the difference between the U.S. trade gap and securities purchased by foreigners is an indicator of how easily the nation can finance its external obligations. The trade deficit widened to $60 billion in May from $58.7 billion in April.
The current-account gap, a broader measure of trade that includes investment income and transfers, swelled to a record $811.5 billion in 2006.
China Sells
China, the second-largest holder of U.S. Treasuries, reduced its holdings by $6.6 billion, bringing its total to $407.4 billion. Over the two months of April and May, China's investments in Treasuries have slumped by $12.4 billion, the most in at least seven years.
Japan, the largest foreign owner of U.S. Treasury securities, increased its holdings by $400 million to $615.2 billion.
The U.K., which, through London, acts as a transit point for international investors, especially those in the Middle East, added a net $33.1 billion, bringing holdings to $167.6 billion.
Caribbean banking centers, which analysts link to hedge funds, sold a net $28.5 billion, bringing holdings to $48 billion.
Major oil exporters -- a group that includes the members of the Organization of Petroleum Exporting Countries, Ecuador, Bahrain, Oman and Gabon -- bought a net $9.1 billion of U.S. securities.
Last Updated: July 17, 2007 13:56 EDT
|
|
