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As the Canadian dollar hit bottom last summer, Canadian investors poured nearly $1.7 billion into American securities and bonds, according to a report from Statistics Canada.

Canadian investors, fearing the instability of their dollar, pulled $1.65 billion out of national investments in July and put "the whole shooting match in the U.S. -- $990 million into stocks and $660 million into bonds," said Donald Granger, an analyst with the government statistics agency.

Though foreigners bought $593 million worth of Canadian securities in July, it wasn't nearly enough to offset the outflow -- the second-highest monthly buy of foreign securities on record, he added.

Why did it happen?

"All you have to do is look at the currency," explained Scott Kinnear, an economic analyst with the Toronto-based Nesbitt Burns investment firm. "Just as investors from other countries fled national investments when their currencies lost ground, Canadians also sought a safe haven in U.S.-dollar securities," he said.

The Canadian dollar hit a low of 63.2 cents on the U.S. dollar in July, but since then has rebounded slightly to about 66.2 cents. In addition, commodity prices for oil and gold have moved up slightly, and these factors could slow the Canadian outflow in the last quarter of 1998, he added.

Despite this, Canadian investment in U.S. securities is already at record levels for the year. The year-to-date total has reached an unprecedented $8.2 billion, compared to $7.3 billion in all of 1997, Granger said.

"Canadians have had a huge appetite for (American) stocks, purchasing nearly $6.6 billion in the first half of the year, compared to buying only $1.6 billion of bonds," he explained.

Non-Canadians also sold $1.3 billion worth of Canadian money market paper in July, he added.

While foreign investors' appetite for Canadian securities was weak in July, Statistics Canada reported interest in Canadian bonds was strong, with foreigners snapping up nearly $1.8 billion worth in July.

"Canadians are looking at American markets as safer and better than their own, because in this environment, safer is probably better," Kinnear explained.

Indeed, in July, said Craig Wright, an economist with the Royal Bank of Canada, the Toronto Stock Exchange fell by nearly 6 percent, while the S&P index dropped by a little more than 1 percent.

Just as Japanese and German investors have started the march to repatriate their investments now that the yen and the deutsche mark have regained some ground against the U.S. dollar, Wright said Canadian investors may reverse course if the Canadian loonie -- as Canadians call the dollar coin -- takes flight.

The Royal Bank of Canada, he said, is predicting the Canadian dollar will float up another half cent by the end of the year and may return to 70 cents U.S. by the turn of the millennium.

But Craig cautioned that a sizable part of the Canadian dollar's weakness is its link to commodity prices and, it's not a safe bet to say commodity prices have hit bottom.

However, Kinnear notes the rebound in commodity prices has helped Canadian stocks and bonds, both of which outperformed those in the United States last week as the loonie gained ground on the back of the firmer oil and gold prices.

As a group, Canadian gold stocks jumped 15 percent on the week and are up "an eye-popping 50 percent so far this month," according to a Nesbitt Burns fact sheet.

Despite the investment outflow and slower economic growth, the Canadian economy is expected to grow by more than 2 percent next year, with only a 25 percent chance of a recession, Wright said.

Now that the Canadian dollar has stabilized, Kinnear said, Canadian companies have become more attractive or at least not as bad as they were once viewed.

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