Tài liệu Capital Flows to Emerging Market Economies

Capital Flows to Emerging Market Economies


September 24, 2005


Overview


The strong recovery in net private capital flows to emerging Table 1
markets that began in 2003 has continued this year. Although a Emerging Market Economies' External Financing
moderation in the pace of flows is anticipated in the next several (billions of U.S. dollars) 2003 2004 2005f 2006f


quarters, the overall level envisaged for 2006 remains relatively
elevated. Downside risks have increased, however, in the face of Current account balance 118.0 151.9 194.4 180.7
rising concerns and unease about a potentially less hospitable External financing, net:
global economic environment going forward. Private flows, net 213.7 317.4 345.2 317.8


Equity investment, net 128.9 167.5 191.3 184.4
Private flows are projected to reach a record high Direct investment, net 95.9 132.2 148.9 145.8
$345 billion this year before slowing to $318 billion in 2006 Portfolio investment, net 33.0 35.3 42.3 38.7
(Table 1, Chart 1). This year’s expected flows surpass the Private creditors, net 84.8 149.8 153.9 133.3
previous record of $323 billion reached in 1996 prior to the Commercial banks, net 25.4 61.1 63.5 57.8
Nonbanks, net 59.4 88.7 90.4 75.5
Asian crisis. The continued robustness in flows is being supported
by a further pickup in direct investment and a record pace of bond Official flows, net -21.4 -30.6 -50.4 -24.2
IFIs -6.6 -16.4 -23.9 -12.4
issuance as sovereign and private borrowers endeavor to stay ahead Bilateral creditors -14.8 -14.2 -26.5 -11.8
of the curve before the tightening policy interest rate cycle starts to
1
hit bond markets visibly. With many debtors having already taken Resident lending/other, net -37.6 -38.6 -87.7 -72.3
the opportunity to pre-finance obligations due in 2006, the current Reserves (- = increase) -272.6 -400.0 -401.4 -402.0
pace of bond issuance is unlikely to be sustained next year,
contributing to an overall slowdown in private capital flows to f = IIF forecast


1
emerging markets. This forecasted slowdown could become more Including net lending, monetary gold, and errors and omissions.


pronounced if downside risks from a further jump in oil prices,
unanticipated policy slippage or other problems in a major emerging
market economy, or a sudden shift in investor risk aversion
stemming, inter alia, from concerns over global imbalances or the
fragility of global growth were to materialize.


The strong private capital flows to emerging markets in Chart 1: Capital Flows to Emerging Markets
2005 has occurred against a backdrop of strong global economic (billions of U.S. dollars)
expansion, which has been supported by strong corporate
400
profitability and buoyant housing markets in the United States
and elsewhere. The measured but sustained monetary tightening in
300
the United States has yet to dampen growth, as bond yields have
tended to drift down. Neither have sharply higher oil prices begun
to visibly affect the forward momentum of global activity, although 200


this could now change in the aftermath of Hurricane Katrina.
100


Low yields on U.S. Treasury bonds and a flat yield curve
have pushed investors to purchase lower rated credits, 0
compressing credit spreads, including those on emerging market
bonds. Despite the historically high price of emerging market -100
assets, investor demand remains strong, reflecting both the 94 95 96 97 98 99 00 01 02 03 04 05f 06f
search for yield and the improving fundamentals in many key Official lending Private equity Private credit


countries. Most of these countries have experienced robust growth
with relatively little inflation while accumulating substantial
international reserves as a result of current account surpluses and
large capital inflows. Growing confidence on the part of investors
in the policy performance of some of the key emerging market


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