Showing papers on "Foreign portfolio investment published in 2002"

Selling China : Foreign Direct Investment During the Reform Era

Abstract: In this book, Yasheng Huang makes a provocative claim: the large absorption of foreign direct investment (FDI) by China is a sign of some substantial weaknesses in the Chinese economy. The primary benefits associated with China's FDI inflows are concerned with the privatization functions supplied by foreign firms, venture capital provisions to credit-constrained private entrepreneurs, and promotion of interregional capital mobility. Huang argues that one should ask why domestic firms cannot supply the same functions. China's partial reforms, while successful in increasing the scope of the market, have so far failed to address many allocative inefficiencies in the Chinese economy.

Foreign Direct Investment: Theory, Evidence and Practice

Abstract: Preface Introduction and Overview Theories of Foreign Direct Investment The Effects of Foreign Direct Investment International Capital Budgeting Country Risk and Political Risk International Taxation International Cost of Capital and Capital Structure Transfer Pricing Control and Performance Evaluation Concluding Remarks References Index

Growing Up with Capital Flows

Abstract: We examine the capital flows-domestic investment relationship for 60 developing countries from 1979 to 1999. In the 1990s, even as liberalization attracted new flows, foreign capital stimulated less domestic investment than in the preceding decade. With greater financial integration, governments accumulated more international reserves and domestic residents diversified by investing abroad. Foreign investors were also motivated by diversification objectives rather than by unmet investment needs. Inflows were channeled increasingly through portfolio flows - or through foreign direct investment with the characteristics of portfolio capital - resulting in weak investment stimulus. However, stronger policy environments strengthened the link between inflows and investment.

Core labour standards and foreign direct investment

Abstract: T here has been a steady expansion of foreign direct investment (FDI) in recent decades. Figure 1 shows inward FD I stock as a percentage of GD P from 1980 to 1998 for the world and for less developed countries (LDCs). The upward trend is particularly strong for LDCs, increasing from 5.4 to 20.0 percentage points over these years and suggesting the increased importance for these countries of FDI, as well as the increased presence of multinational firms. A longside the expansion of FDI have risen concerns regarding competit ion between countries or regions to attract FD I. Some determinants of FDI location, such as market size, are not amenable to short-run policy manipulation and so do not come into play in this regard. These more persistent longrun determinants have been referred to as “classical sources of comparative advantage” with regard to FDI location (Wheeler and Mody, 1992, p. 57). However, other potential determinants are more malleable, among them taxation policy and environmental and labour regulations. The scenario of countries or regions competing against each other by offering investors ever greater tax breaks and ever weaker regulations has been termed a “race to the bottom.” A recent study published by the OE CD on competition between countries to attract FDI seeks to establish whether there is evidence of such a race to the bottom. The study concludes that there is no decisive evidence of “any inexorable tendency towards global ‘bidding wars’ among governments in their competition to attract FDI,” but that the “‘prisoner’s dilemma’ nature of the competit ion creates a permanent danger of such ‘wars’” (Oman, 2000, p. 10). A race to the bottom does not depend on investors being truly attracted to countries with lower labour standards. Perception, true or false, will suffice.

Stock Prices and Exchange Rates: Are they Related? Evidence from South Asian Countries

Abstract: I. INTRODUCTION The issue of whether stock prices and exchange rates are related or not has received considerable attention after the East Asian crisis. During the crisis the countries affected saw turmoil in both currency and stock markets. If stock prices and exchange rates are related and the causation runs from exchange rates to stock prices, then the crisis in the stock markets can be prevented by controlling the exchange rates. Moreover, developing countries can exploit such a link to attract/stimulate foreign portfolio investment in their own countries. Similarly, if the causation runs from stock prices to exchange rates then authorities can focus on domestic economic policies to stabilise the stock market. If the two markets/prices are related then investors can use this information to predict the behaviour of one market using the information on other market.

Did the Asian financial crisis scare foreign investors out of Japan

Abstract: Foreigners became net sellers of Japanese equities during the Asian financial crisis in 1997. In this study, I examine whether this shift in aggregate foreign portfolio investment activity in Japan exacerbated the effect of the crisis on markets, or whether it simply reflected positive-feedback trading behavior. The data draws from weekly reports to the Tokyo Stock Exchange (TSE) of aggregate purchases and sales of Japanese equities by foreigners and local institutional and individual investors. I find evidence of consistent positive-feedback trading before, during and after the Asian crisis among foreign investors, while Japanese banks, financial institutions, investment trusts and companies themselves were aggressive contrarian investors. There is no evidence that this trading activity by foreigners destabilized the markets during the crisis.

What Moves Capital to Transition Economies

Abstract: Between 1991 and 1999, capital flows to 25 transition economies in Europe and the former Soviet Union differed widely in terms of overall levels and the share and composition of private flows. With some exceptions (notably Russia), the main form of private inflows was foreign direct investment. Portfolio investment was volatile and concentrated in a handful of countries. Regressions show that direct investment can be well explained in terms of economic fundamentals, whereas the presence of a financial market infrastructure and a property-rights indicator are the only explanatory variables that seem to have had a robust effect on portfolio investment.

Portfolio Selection and Asset Pricing

Abstract: Criteria, Models and Strategies in Portfolio Selection.- A Model for Portfolio Selection with Order of Expected Returns.- A Compromise Solution to Mutual Funds Portfolio Selection with Transaction Costs.- Optimal Portfolio Selection of Assets with Transaction Costs and No Short Sales.- Portfolio Frontier with Different Interest Rates for Borrowing and Lending.- Multi-period Investment.- Mean-Variance-Skewness Model for Portfolio Selection with Transaction Costs.- Capital Asset Pricing: Theory and Methodologies.- Empirical Tests of CAPM for China's Stock Markets.

Multinational Enterprises in Emerging Markets

Abstract: Chapter 1 MNEs in Emerging Markets Introduction to Emerging Markets Economic Environment and Outlook of Emerging Markets Commonalities and Distinctions Between Emerging Markets MNE Investments and Operations in Emerging Markets. Chapter 2 Investment and Policies in China Foreign Direct Investment Environment Foreign Direct Investment Policies MNE Investments in China- Comparison Between China and Other Emerging Markets. Chapter 3 Investment and Policies in Russia Foreign Direct Investment Environment Foreign Direct Investment Policies MNE investments in Russia Comparison Between Russia and Other Emerging Markets. Chapter 4 Investment and Policies in Brazil Foreign Direct Investment Environment Foreign Direct Investment Policies MNE investments in Russia Comparison Between Brazil and Other Emerging Markets. Chapter 5 Investment and Policies in India Foreign Direct Investment Environment Foreign Direct Investment Policies MNE investments in Russia Comparison Between India and Other Emerging Markets. Chapter 6 Investment and Policies in Mexico Foreign Direct Investment Environment Foreign Direct Investment Policies MNE investments in Mexico Comparison Between Mexico and Other Emerging Markets. Chapter 7 Investment and Policies in East Europe Foreign Direct Investment Environment Foreign Direct Investment Policies MNE investments in East Europe What is Unique about East Europe. Chapter 8 Investment and Policies in Southeast Asia Foreign Direct Investment Environment Foreign Direct Investment Policies MNE investments in Southeast Asia What is Unique about Southeast Asia Case Studies - Boeing Walmart McDonald Pepsi Johnson & Johnson Nokia Motorola.

Fiscal Incentives, European Integration and the Location of Foreign Direct Investment

Abstract: Foreign direct investment in the European Economic Area (EEA) has grown rapidly in recent years. This paper tests for structural change in the geographical and industrial pattern of foreign direct investment in Europe using a panel data set on outward investment by German companies in the EEA since 1980. There is evidence of significant structural change since 1990, with nearly all locations and industries seeing a higher level of cross–border investment than might have been expected. We also investigate the scope for national governments to affect location choice through the use of fiscal instruments such as corporation taxes, investment in infrastructure and other forms of development grants and subsidies. The findings are mixed. Some measures, such as tax competitiveness, appear important but are sensitive to the specification of the model. However, the level of government fixed investment expenditure relative to that in other economies is found to have a significant positive impact, particularly in locations with less need for EU structural funds. Although the direct marginal impact appears relatively small, an additional finding of significant agglomeration forces suggests that fiscal policies could still have a permanent influence on the location of economic activities.

Political risk and equity investment in developing countries

Abstract: This paper estimates the effect of a measure of political risk on equity investment flows to developing countries. Using a panel data set that includes a larger number of low-income countries than previous studies, it is found that political risk is an important determinant of the sum of foreign direct investment and portfolio equity investment per capita.

Direct Investment Positions for 2001: Country and Industry Detail

Abstract: This article presents the country and industry detail underlying the two positions. The estimates are prepared on a historical-cost basis, which is not adjusted for inflation. Because most investments reflect price levels of earlier periods, the estimates on this valuation basis are less than the current and market values of the positions. Current-cost and market-value estimates of the positions are also prepared, but only at an aggregate level. The revised estimates of the position for 1999 and the preliminary estimates for 2000 N 2000, the historical-cost position of foreign direct investment in the United States (FDIUS) grew 28 percent, while that of U.S. direct investment abroad (USDIA) grew 10 percent. In 1999, the rate of growth of the FDIUS position was 24 percent and that of the USDIA position was 13 percent. In the past 20 years, there were only two other 2-year periods in which the rate of growth for FDIUS substantially exceeded that for USDIA—1983–84 and 1988–89—but in neither period was the difference in the rates of growth as large as in 1999–2000 (table 1).1 The continued global boom in mergers and acquisitions contributed to the growth in both positions in 2000. Most of the cross-border mergers and acquisitions involving U.S. companies were

Theories and Paradigms of International Business Activity

Abstract: Contents: Introduction 1. The Determinants of International Production 2. Trade, Location of Economic Activity and the Multinational Enterprise: A Search for an Eclectic Approach 3. Trade, Location of Economic Activity and the Multinational Enterprise: Some Empirical Tests 4. Explaining the International Direct Investment Position of Countries: Towards a Dynamic or Developmental Approach 5. The Investment Development Path Revisited 6. The Changing Dynamics of International Production: An Economic and Strategic Approach 7. The Eclectic Paradigm of International Production: A Restatement and Some Possible Extensions 8. Some Historical Antecedents to the Eclectic Paradigm 9. Towards an Interdisciplinary Explanation of International Production 10. Reappraising the Eclectic Paradigm in an Age of Alliance Capitalism 11. What's Wrong - and Right - with Trade Theory? 12. Towards a General Paradigm of Foreign Direct and Foreign Portfolio Investment 13. Globalization and the Theory of MNE Activity 14. The Eclectic Paradigm as an Envelope for Economic and Business Theories of MNE Activity 15. The Challenge of Electronic Markets for International Business Theory 16. Relational Assets, Networks and International Business Activity Index

System and method for creating and maintaining investment portfolios

Abstract: An investment services architecture provides a suite of investment management tools and services to investors. The architecture includes an investment services hosting site that offers investment services to investors who access the services via the Internet using various investor computing devices. The architecture provides for the identification of a set of investment holdings associated with a first investment portfolio and identification of a set of investment holdings associated with a second investment portfolio. A ideal investment portfolio is created by merging the set of investment holdings associated with the first investment portfolio and the set of investment holdings associated with the second investment portfolio. Using the ideal investment portfolio, the architecture is able to suggest sales and purchases of holdings in an effort to achieve investment performance similar to the ideal investment portfolio.

Are Emerging Market Equities a Separate Asset Class

Abstract: Historically, fund managers and investors making portfolio allocation decisions have considered emerging market equities a separate asset class. More recently, a number of economic, legal, accounting, and financial developments have eroded the root differences between emerging and developed country financial markets. These liberalizations include capital market reforms that have reduced the constraints and limits on foreign portfolio investment. The authors find that empirical evidence strongly supports the view that the world9s financial markets are becoming increasingly integrated, and that the integration process encompasses emerging markets. As a result, the idea of a rigid separation between emerging market and developed market pools of investible funds (and adoption of separate performance benchmarks) seems no longer appropriate. Indeed, recent moves by international investors to benchmark their portfolios to MSCI9s all–country world index and related world indexes, which include both emerging market and developed market securities, seem a step in this direction.

Window Dressing and Bond Mutual Funds

Abstract: We examine portfolio credit quality holding and daily return patterns in a large sample of bond mutual funds and document significant evidence of window dressing. First, using portfolio credit quality holdings data, we find strong evidence that bond funds on average hold significantly more government bonds during disclosure than non-disclosure, presumably to present a safer portfolio to shareholders. However, there also appears to be a clientele of bond funds that increase positions in speculative-grade corporate bonds at disclosure, most likely in an attempt to advertise higher yields. Second, using daily returns data we identify return patterns that are atypical around disclosure periods. Specifically, we investigate the loadings that funds have on components of a multiple-index market model. We find that certain funds do appear to have different loadings on index components around disclosure periods than at other times of the year. Differences in factor loadings around disclosure periods indicate that the portfolio is tilted toward one sector of the bond market and away from another. Such differences are consistent with window dressing.

Forms of Foreign Investment Liberalization and Risk in Emerging Stock Markets

Abstract: I examine the effect of different forms of foreign investment liberalization on risk in emerging equity markets, including international cross-listings and closed-end country funds, and in the domestic equity market as foreign investment restrictions are eliminated. I find that in Latin American markets volatility declines significantly with different forms of foreign investment liberalization, and in Asian markets volatility does not increase significantly. Volatility is driven by domestic factors in South America, but the transmission of volatility from the United States to Mexico increases after liberalization. The market risk exposure increases in Argentina after liberalization, in Chile with an index of American Depositary Receipts, and in Thailand with greater foreign ownership, reducing the diversification benefits of these markets.

Foreign Direct Investment in China: Recent Trends and Patterns

Abstract: Foreign direct investment (FDI) in China has undergone a rapid growth since 1992. In both 1992 and 1993, actual investment more than doubled. In the peak year of 1993, contractual investment increased ninefold compared to 1991. Beginning in 1993, China emerged as the largest recipient of FDI among developing countries. Though this rising trend slowed down after 1995, the momentum resumed in 2000. China’s joining the WTO is providing a strong push to a new wave of foreign direct investment to China. Several factors can explain this important change in China’s economic landscape. First, Deng Xiaoping’s South Tour in the summer of 1992 established the direction of “socialist market economy” for China’s economic reform, which was officially confirmed at the 14th National Congress of the Chinese Communist Party of the same year. This helped offer foreign investors a better-reformed investment environment. Second, rapid expansion of foreign direct investment in 1992 took place at a quite low level. In 1991, actual investment was only US$ 4.366 billion. Third, the significant acceleration of economic growth since 1992, combined with the political stability re-established, strengthened foreign investors’s confidence of China’s investment environment and led them make a strategic change in investment decision making. Fourth, the foreign investment regime in China was significantly reformed. The early liberalization, which applied to the four special economic zones, was further extended to broad areas, especially, the developed Yangtze River Delta Area, and restrictions on FDI were relaxed in some important areas (domestic sale, equity control, market access, etc.). There are two important aims underlying the change of the policy stance of the Chinese government. One is to “exchange technology with market”, and the other is to push the transformation of the inefficient big staterun industrial enterprises through the means of joint ventures. From the external perspective, broadly speaking, the recent rise of FDI in China is part of the international capital movement in the developing world, which results from the realignment in the location of production facilities and investment of multinational corporations (MNCs) as well as from the classic “flying geese paradigm” of international division of labor in which the countries with higher wage levels and more advanced technology move the production of more labor-intensive goods to the countries with lower wages as well as less advanced technology. Obviously, some of the factors, which lead to the dramatic increase of foreign direct investment in China, are only temporary; thus, the gains are static in nature. It is of interest to know the basic forces and mechanisms, which determine the long-run trends of foreign direct investment in China. The purpose of this paper is to document and analyze the recent trends of inward foreign direct investment (FDI) in China and its effects on the Chinese economy, and to identify the patterns of FDI in China, which began to take shape in the past decade. There are several basic findings: first, while the investment shares of Hong Kong significantly decreased, the shares of the US and EU greatly increased; second, foreign direct investment in labourintensive manufacturing sectors entered a “saturation” stage, and capital- and technology-intensive manufac

Foreign Direct Investment

Abstract: Foreign direct investment (FDI) is the process whereby residents of one country (the source country) acquire ownership of assets for the purpose of controlling the production, distribution and other activities of a firm in another country (the host country). The International Monetary Fund’s Balance of Payments Manual defines FDI as “an investment that is made to acquire a lasting interest in an enterprise operating in an economy other than that of the investor, the investor’s purpose being to have an effective voice in the management of the enterprise”. The United Nation’s 1999 World Investment Report (UNCTAD, 1999) defines FDI as “an investment involving a longterm relationship and reflecting a lasting interest and control of a resident entity in one economy (foreign direct investor or parent enterprise) in an enterprise resident in an economy other than that of the foreign direct investor (FDI enterprise, affiliate enterprise or foreign affiliate)”. The term “long-term” is used in the last definition in order to distinguish FDI from portfolio investment, which we dealt with in the previous chapter. FDI does not have the portfolio investment characteristic of being short term in nature, involving a high turnover of securities.

The effects of foreign direct investment

Abstract: FDI involves the transfer of financial capital, technology and other skills (managerial, marketing, accounting, and so on) as we have seen so far. This process gives rise to costs and benefits for the countries involved: the investing country (the source of the investment) and the host country (the recipient or the destination of the investment). It is not clear, however, what costs are borne and what benefits are enjoyed by the two countries, at least not quantitatively. There is even a fundamental disagreement on what constitutes the costs and benefits of FDI from the perspectives of the two countries. This disagreement is indicated by the big gap between those holding proglobalization, free-market views, and those with anti-globalization, anti-market views. Moreover, the division of welfare gains between the host country and the investing country does not only depend on given market prices, but also on the relative strength of the two countries in bargaining over the terms of the agreement governing a particular FDI project. Nevertheless, one country’s losses are not necessarily the other country’s gains. Kindleberger (1969), for example, argues that the relationship arising from the FDI process is not a zero-sum game.

Foreign Investment and Productivity: A Study of Post-reform Indian Industry

Abstract: The paper uses panel data for Indian industries in the post-reform period to study the direct and indirect productivity effects at firm level generated by foreign investment. It finds no evidence that foreign investment directly increases firm-level productivity, nor that R&D spending is more productive in firms or sectors with higher foreign investment. It however finds strong evidence that local firms benefit from foreign investment in their industries. These benefits are higher for larger firms and those that do more business domestically.

Foreign Investment and Ownership Structure: An Empirical Analysis

Abstract: An important decision that multinational firms (MNFs) face when expandingabroad concerns the specific form of their investment. The usual choice is betweenexports, licensing or franchising, and foreign production. In recent years, followingthe globalisation trend in the world economy, all modes of foreign expansion aremet with increasing frequency. Among them, foreign direct investment (FDI) hasbecome the most popular strategy. Barrell and Pain (1997) report that the number ofMNFs has increased threefold since the 1980s, pushing the ratio of aggregate FDIstock to GDP in OECD economies from 4.7% in 1975 to over 10% in 1995. In thesame year, the value of foreign affiliates’ sales exceeded the value of world exportsby around one quarter. Because of its importance in international development, FDIalong with its determinants has been the subject of extensive research.

Theories of Foreign Direct Investment

Abstract: The importance of and growing interest in the causes and consequences of FDI has led to the development of a number of theories that try to explain why MNCs indulge in FDI, why they choose one country in preference to another to locate their foreign business activity, and why they choose a particular entry mode. These theories also try to explain why some countries are more successful than others in obtaining FDI. Thus, some of the theories try to explain outward FDI (why MNCs choose to invest abroad), whereas others try to explain inward FDI (that is, a country’s propensity and ability to attract FDI).

Chinese legal reform : the case of foreign investment law

Abstract: 1. Introduction 2. The Main Features of China's New Legal System 3. The Politico-Economic Dilemma of China's Foreign Investment Law 4. The International Background of China's Foreign Investment Law 5. The Objectives and Framework of Foreign Investment Law 6. Legal Controls on Foreign Direct Investment 7. Legal Incentives to Foreign Direct Investment 8. The Legal Protection of Foreign Investors' Management Autonomy 9. The Protection of Foreign Investors' Contract Rights 10. Conclusion

Foreign Investment and National Interests in the Russian Oil and Gas Industry

Abstract: This article examines the political economy of foreign direct investment in the Russian oil and gas industry in order to explain the limited role of foreign capital in this sector. There are three forms of foreign direct investment in the Russian oil and gas industry: (1) joint ventures, (2) investment within the framework of a production sharing agreement (PSA) and (3) foreign equity investment. The development of these three forms of foreign direct investment is analysed with special reference to the interests of the parties involved, before a conclusion on the political factors determining the conditions for foreign investment is made.