* Foreign investment declines by C$1.9 billion in December
* Selloff of Canadian shares due to merger and acquisition activity
* Canadians focus on U.S. government bonds
OTTAWA, Feb 19 (Reuters) - Foreign investors reduced their holdings of Canadian securities in December by C$1.9 billion ($1.9 billion), led by the biggest divestment of shares since November 2007 due to cross-border mergers and acquisitions, Statistics Canada said on Tuesday.
In November, foreigners had added C$5.5 billion in Canadian securities to their portfolios, revised from C$5.6 billion previously.
Nonresidents unloaded C$6.7 billion worth of equities in December as portfolio investors “rendered their Canadian shares to foreign direct investors,” Statscan said.
Foreign holdings of Canadian bonds also fell. The C$655 million decline, the first reduction in six months, stemmed from large retirements and coupon payments.
They added C$4.8 billion in debt securities, focused mainly on money market instruments and federal government paper.
In 2012 as a whole, foreigners bought C$83.2 billion in Canadian securities, down from C$97.3 billion in 2011.
Canadian investors, for their part, added C$5.5 billion of foreign securities to their portfolios in December. U.S. government bonds accounted for C$3.2 billion of the total $3.8 billion outflow into foreign bonds in the month.
Canadians also boosted their holdings of foreign equities to C$2.5 billion while reducing money market instruments.
Canadian investment in securities abroad almost doubled in 2012 to C$35.1 billion from C$18.3 billion in the previous year.