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UPDATE 1-Foreigners lose taste for U.S. assets in Nov -U.S. Treasury

Thursday, 16 Jan 2014 | 9:38 AM ET

NEW YORK, Jan 16 (Reuters) - Foreigners sold U.S. assets in November, reversing a buying binge sparked the prior month by the end of a 16-day U.S. government shutdown, U.S. Treasury data showed on Thursday.

Overseas investors shed a net $29.3 billion in long-term U.S. securities in November, the most in five months.

That erased a $28.7 billion inflow recorded in October and resumed a trend of outflows that has persisted in 2013.

Since January 2013, U.S. long-term assets have suffered a net foreign outflow of $92.7 billion, according to Treasury data.

"The long-term trend is concerning and has negative implications for the dollar," said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.

Including short-dated securities such as bills, foreign holdings declined by $16.6 billion after pulling in a hefty $188.1 billion in October.

The prior month, capital inflows into U.S. markets were the largest since the height of the financial crisis in October 2008 when foreigners desperate for safe-haven assets poured in nearly $300 billion.

Selling in November was heaviest in stocks, which investors sold to the tune of $7 billion, nearly wiping out a $7.8 billion inflow in October.

"That is a big question mark because every major bank across the board agrees that the two most important trends right now are that developed-world equities will outperform emerging market equities and stocks will beat bonds," Woolfolk said.

He said Wall Street's massive rally in 2013 - the S&P 500 index delivered a total return of more than 30 percent - might have pushed some foreigners to the sidelines by November.

"I would expect to see some bounce-back, perhaps in December but maybe not until January," he said.

Foreign U.S. Treasury holdings fell by $3.4 billion, though "official institutions," which include central banks, were net buyers to the tune of $10.2 billion.

Treasury holdings at China and Japan, the two largest U.S. foreign creditors rose by a combined $24.2 billion.

Foreigners were also net sellers of U.S. corporate bonds and debt issued or guaranteed by the biggest U.S. mortgage financing agencies, while U.S. investors put more money into foreign stocks and bonds than domestic ones in November.