UPDATE 1-Foreigners boost Canadian bond purchases in Jan

* Foreigners buy more bonds, money market paper

* Canadians sell most foreign bonds since October 2008 (Adds details)

OTTAWA, March 18 (Reuters) - Foreign portfolio investment in Canada rose more than expected in January to C$11.83 billion ($11.71 billion) from C$11.14 billion in December, due mainly to strong interest in federal government bonds, Statistics Canada said on Thursday.

Analysts surveyed by Reuters had forecast a net foreign investment of C$8 billion in Canadian securities.

Nonresidents acquired C$10.02 billion in Canadian bonds in January, continuing a trend seen throughout 2009. Two-thirds of purchases were in federal government bonds, with most of the remaining activity seen in the secondary market for corporate bonds.

Foreigners directed C$2.5 billion of their funds to money market instruments and disposed of C$649 million of Canadian equities as stock prices fell 5.5 percent in January.

Canadians divestment of foreign bonds in January reached levels not seen since the height of the financial meltdown in October 2008, leading to a net divestment in foreign securities of C$5.83 billion in the month.

They dumped C$5.56 billion worth of bonds, C$647 million worth of stocks and added C$373 million in money market instruments to their portfolios.

In 2009, net Canadian acquisitions abroad totaled C$8.67 billion after registering a net divestment in 2008 for the first time in three decades, selling C$13.65 billion. ($1=$1.01 Canadian) (Editing by James Dalgleish)