The magic figure this month is $7.8 billion, that the capital inflow (mostly into T-bills). Last month, the bulk of capital inflow was money market so this is a shift in the type of assets being purchased. Interestingly, stocks investment inflow remain at "depressed" levels (still growing but getting very small).
One reason, is that foreign investors have already reached their equity capital allocation target for Canada (ok its possible -- and make more sense than other options), and are seeking safety in Canada's T-bill market. As usual, the bulk of this fixed income is in the form of federal instrument (as opposed to provincials). This supports the thesis that foreign investors are "parking" their cash in Canada (rather than investing in Canada), looking for safety rather than income.
Again the preference for ultra liquid T-bills (instead of T-bonds) speaks volume as to foreign investors' risk appetite. One more headache for the Bank of Canada.
Finally, the CAD is back to near parity (driven by last week's "risk-On" mentality). Of course the real test for all this stuff is the October 23rd meeting in the EU on what to do with the crisis! My bet: kick the can down the road... the "victory" in getting Hungary on board was, lets not forget, about the June EFSF. It doesn't come close in resolving the problems now -- where its $3 or $4 trillion (thousand billion) that is needed.
I have always said that Canada is a second derivative country (we supply stuff to make stuff) and the events in China should not be discounted, housing sales have fallen by half (Chinese policy) in an effort by the central government to tackle inflation (running at 6% -- food inflation is around 13%, when the official inflation target is 4%). This will reduce the demand for steel, concrete, wood and energy. Several sector in which Canada is a dominant trading partner.
It could get intersting