Showing papers on "Foreign portfolio investment published in 2017"

Global Equity Country Allocation: An Application of Factor Investing

Abstract: Under the paradigm of factor investing, we create a global factor allocation strategy using country indexes and portfolio construction methodologies that are robust to estimation error. Implementable through exchange-traded funds or index futures, a portfolio based on country indexes with favorable factor exposures significantly outperforms, both economically and statistically, the world market capitalization portfolio. The outperformance remains significant after taking into account transaction costs, alternative portfolio construction methodologies, and tracking error constraints. From a practical investment perspective, country-based factor portfolios offer a viable alternative implementation of factor investing in a world of illiquidity, transaction costs, and capacity constraints.

A Study of the Factors Affecting the Choice of Investment Portfolio by Individual Investors in Singapore

Abstract: Singapore being an island economy and a financial hub with residents from diverse backgrounds, huge ethnic diversity, coming from different part of the world. This study aims to gain insights and information into the factors that affect investment planners, financial advisers and individuals need to consider improving their choice of the portfolio and its performance. People’s investment decisions and hence their portfolio, which hitherto has not been tested. Furthermore, it intends to identify the factors that drive investors to choose one investment over another and determine how they make their investment portfolios. The survey was modelled using the smart-pls statistical package (PLS-SEM), which is partial least squares structural equation modelling.

What to do when foreign direct investment is not direct or foreign : FDI round tripping

Abstract: As globalization has intensified, multinational enterprises'investments have become a sophisticated set of financial transactions that are difficult to monitor and classify by the home and host countries. In some cases, what is classified as foreign direct investment is rather"indirect foreign direct investment,"channeled through a third country. Indirect flows have increased significantly in recent years, now accounting for almost 30 percent of global foreign direct investment flows. Indirect foreign direct investment flows also capture the flow of domestic funds channeled through offshore centers back to the local economy in the form of direct investment, also known as"foreign direct investment round tripping."These investments do not offer the benefits of typical foreign direct investment, and may lead to tax revenue and welfare losses. Round tripping is mostly channeled through offshore financial or transshipping centers. In most cases, domestic companies round trip their investments to benefit from preferential treatments reserved for certain countries and their firms. The most important policy measure to reduce round tripping activity and mitigate its impact is to improve the business environment for all firms; this can foster domestic and foreign investment, and may, to some extent, also curb foreign direct investment round tripping. Nevertheless, countries also need to adapt to the new playing field for foreign direct investment, and recognize the trade-offs of their national policies on capital flows. National policy measures must be complemented by international actions. At the same time, all indirect foreign direct investment flows should be closely monitored, something that is best conducted in coordination with international partners.

Weakness in investment growth : causes, implications and policy responses

Abstract: Investment growth in emerging market and developing economies has slowed sharply since 2010. This paper presents a comprehensive analysis of the causes and implications of this slowdown and presents a menu of policy responses to improve investment growth. It reports four main results. First, the slowdown has been broad-based and most pronounced in the largest emerging markets and in commodity exporters. Second, it reflects a range of obstacles: weak activity, negative terms-of-trade shocks, declining foreign direct investment inflows, elevated private debt burdens, heightened political risk, and adverse spillovers from major economies. Third, by slowing capital accumulation and technological progress embedded in investment, weak post-crisis investment growth has contributed to sluggish growth of potential output in recent years. Finally, although specific policy priorities depend on country circumstances, policymakers can boost investment both directly, through public investment, and indirectly, by encouraging private investment, including foreign direct investment, and by undertaking measures to improve overall growth prospects and the business climate.

Market size as a determinant of the foreign direct investment inflows in the western balkans countries

Abstract: Numerous empirical studies confirm that market size is one of the key determinants of foreign direct investment inflows, particularly market-oriented projects of foreign direct investment. Basically, the dominant view is that a larger market of the host country attracts a greater quantum of foreign direct investment. This paper examines the influence of market size, as well as the impact of market growth, trade openness, and population size on the foreign direct investment inflows into the six countries of the Western Balkans region in the period 2007-2015. Multiple regression analysis was applied in examining the impact of these variables on foreign direct investment inflows. The obtained results show that market size, market growth and population size had a significant positive impact, while trade openness had a negative impact on foreign direct investment inflows in the observed countries. Thus, the main findings of this research confirm that market size is an important determinant of the foreign direct investment inflows in the Western Balkans countries.

The Future of International Investment Regulation: Towards a World Investment Organisation?

Abstract: With growth in foreign investment and in the number of companies investing in foreign countries, the application of general principles of public international law has not been deemed adequate to regulate foreign investment and there is, as yet, no comprehensive international treaty on the regulation of foreign investment. Consequently, states have resorted to bilateral investment treaties (BITs), regional trade and international investment agreements (IIAs) and free trade agreements to supplement and complement the regime of protection for foreign investors. In the absence of an international investment court, states hosting foreign investment or investor states have opted for investor-state dispute settlement mechanism (ISDS). This mechanism has brought about its own challenges to the international law of foreign investment due to inconsistency in the application and interpretation of the key principles of international investment law by such arbitration tribunals, and further, there is no appellate mechanism to bring about some cohesion and consistency in jurisprudence. Therefore, there are various proposals mooted by scholars to address these challenges and they range from tweaks to BITs and IIAs, the creation of an appellate mechanism and the negotiation of a multilateral treaty to proposals for reform of ISDS only. After assessing the merits and demerits of such proposals, this study goes further, arguing for the creation of a World Investment Organisation with a standing mechanism for settlement of investment disputes in order to ensure legal certainty, predictability and the promotion of the flow of foreign investment in a sustainable and responsible manner.

Foreign direct investment and human capital: evidence from developing countries

Abstract: The main aims of this study are to empirically evaluate the impact of foreign direct investment (FDI) along with some other control variables such as: GDP per capita, international remittances, and exports on human capital, measured by gross secondary school enrolment for 34 developing countries over the time period ranging from 1981-2013. The results of fixed-effects model reveal that the inward FDI has statistically positive impact on human capital. Therefore, this study rejects the null hypothesis that there is no significant positive relationship between inward FDI and human capital, where as it accepts the alternative one. Thus findings of the study suggest that policy makers need to devise conductive and investment friendly policy in order to enhance more FDI into the host countries. As a result, it will largely improve the social welfare of the people of these developing countries.

Foreign Portfolio Investment and Economic Growth in Nigeria Democratic Settings

Abstract: The study examined the relationship between foreign portfolio investment, democracy and economic growth in Nigeria. This was with a view to explore the nexus between foreign portfolio investment, democracy and economic growth in Nigeria.Secondary data were used in this study. Annual time-series data for the period 1986 to 2013 on foreign portfolio investment and maximum lending rate were obtained from Central Bank of Nigeria (CBN) Statistical Bulletin, while data on variables such as GDP growth rate and gross domestic savings were obtained from World Development Indicators (WDI) database, published by the World Bank. Data collected were analyzed with both descriptive statistics and econometric techniques. Time series properties of the variables were examined using both Augmented Dickey Fuller and Phillip Peron tests. Cointegration properties of the variables were also examined. Vector Auto-Regressive technique supported by Variance Decomposition and Impulse Response analysis were employed to empirically determine the relationship between foreign portfolio investment and economic growth in Nigeria. The results showed that foreign portfolio investment inflow was more stable in democratic periods between 1999 and 2013 than the military periods between 1986 and 1998 and that the correlation between economic growth and foreign portfolio investment is positive and very significant. The result showed that in the longrun foreign portfolio investment had positive and significant effect on the economic growth in Nigeria (t = 3.7, p 0.05). This study therefore concluded; the impact of foreign portfolio investment on economic growth was very large and significant in the longrun; that democracy in itself affected economic growth significantly and positively but democratic government had no significant effect on the relationship between foreign portfolio and economic growth;. Keywords : Democracy, Foreign Portfolio Investment, Economic Growth: JEL CODES; F02, F3 O10,

Determinants of Foreign Direct Investment in the Mining Industry

Abstract: A range of social, political, and economic factors determine where mining companies invest their scarce capital. This chapter identifies nine areas of risk that investors need to consider before investing in the sector. These include high sunk costs, the finite life of a deposit, and the long period to achieve a positive financial return. Add to this, legacy issues and it is clear that mining is a high-risk venture. This chapter argues that increased attention to the nine areas of risk may benefit mining companies in the future.

Fdi determinants in the eurasian economic union countries and eurasian economic integration effect on fdi inflows

Abstract: The paper examines the potential determinants of foreign direct investment inflows into the region of Eurasian Economic Union, as well as incentives for investment into other neighboring countries. In the first model, the authors test a hypothesis on country specific foreign direct investment determinants for the Eurasian Economic Union region. The results of fixed effects estimation show that gross domestic product, infrastructure development and secondary education enrollment have a positive statistically significant effect on the foreign direct investment inflows into the region. Conversely, the impact of Customs Union on foreign direct investment appeared to be negative. Furthermore, in the second model of the natural experiment, the authors empirically test the hypothesis on Customs Union’s effect on foreign direct investment while controlling for both country and time effects. The model includes evaluating the impact of the policy change on foreign investment inflows. The natural experiment outcome also points to the negative effect of Eurasian economic integration on foreign direct investment inflows. Although the countries of Eurasian Economic Union have relatively business friendly regulations, such procedures as enforcing contracts, resolving insolvencies and dealing with construction permits are time-consuming. For attracting foreign investment, it is advisable to facilitate such procedures and make the process of setting up a new business less onerous. The research can be used as an outline for further examining of Eurasian economic integration and apart from that, the study results can be applied for practical purposes of policy elaboration aimed at stimulating foreign direct investment into the Eurasian Economic Union.

Integration among global equity markets: portfolio diversification using exchange-traded funds

Abstract: We study global equity market integration utilizing daily closing price data (January 2001-January 2004) from five selected Exchange-Traded Funds (ETF). Standard & Poor’s 500 (SPY), Ishares Taiwan (EWT), Ishares Australia (EWA), Ishares Spain (EWP) and Ishares Austria (EWO) are used to represent the U.S., and the four emerging countries, two from Asia and two from European equity markets, respectively. We analyze the correlations between the five return series and examine how the returns on a single ETF are affected by the other four ETF returns in order to evaluate the case for portfolio diversification. We also study the stability of equity market interdependence after an exogenous shock. While the findings indicate that the interdependences among the five markets are significant, there is still room for international portfolio diversification. For example, investing in Austria provides diversification benefits for American, Taiwanese and Australian investors. Investors from Taiwan can realize benefits by investing in Europe and in Australia but not in the US. Austrian investors, on the other hand, can diversify portfolios by investing in the US, Taiwan and Australia. Finally, the study of the effect of the Iraq war on the co-movement of the equity markets provides mixed results for the hypothesis that the international market correlations increase after an exogenous shock.

Foreign Direct Investment and the Chinese Economy

Abstract: Foreign Direct Investment and the Chinese Economy provides a comprehensive overview of the impact of foreign direct investment, with extensive empirical evidence, on the Chinese economy over the last three and a half decades.

The Impact of Stock Market Performance on Foreign Portfolio Investment in China

Abstract: The research is aimed at investigating the impact of stock market performance and inflation on foreign portfolio investment (FPI) in China. For this purpose, time series quarterly data from 2007Q1 to 2015Q4 is used. On the basis of stationarity results, ARDL model is used to examine the impact of the stock market prices and inflation on FPI. The results show that there is significant positive impact of stock market performance on the FPI, whereas inflation is found to be negatively associated with the FPI. The study also reveals that some historical events like Asian financial crisis of 2008, and the Shanghai Composite Stock Index crash of 2015, significantly affected the foreign portfolio investment in China. The investors should consider these two factors while investing in foreign financial markets. Keywords : Stock Market Performance, Inflation, FPI, China JEL Classifications: F21, G11, O16, P45

The Impact of Financial Development on Foreign Direct Investment in Nigeria

Abstract: The study examined the relationship between foreign direct investment and financial development in Nigeria for the period 1980 to 2015. Using the vector error correction model (VECM) technique, the study observed a negative relationship existed between financial market development and foreign direct investment in the long run while in the short run, a positive relationship existed between financial market development and foreign direct investment in Nigeria over the estimated period of 1980-2015. Therefore, the study recommended further development of the Nigerian financial market by the monetary authority given its positive influence on the inflows of foreign direct investment in the short run. There is also the need for more financial reform of the Nigerian financial system in order to bring more foreign direct investment into the country both in the long and short runs. Keywords Financial development, Foreign Direct Investment, VECM, Nigeria

Cross-Border Capital Flows and Economic Performance in Africa: A Sectoral Analysis

Abstract: We argue that cross-border capital flows can provide relief for African countries’ pervasive and extraordinarily high financial constraint, if properly harnessed by matching differential flows—foreign direct investment, foreign portfolio investment and remittances—with the production sectors that they are most suited for. Guided by the economics that underpin this productive matching, we used difference GMM to estimate the postulated relationship between cross-border capital flows and sectoral value-added growths. We find that, indeed, certain flows aid growth in some sectors while retarding or not affecting growth in other sectors. Therefore, African countries can use cross-border capital flows strategically to relieve their financial constraint and, consequently, enable economic growth and development.

China Moves the G20 Toward an International Investment Framework and Investment Facilitation

Abstract: China is increasingly concerned with protecting its outward foreign direct investment, facilitating the operations of its firms abroad and creating a strong international investment law and policy regime. After briefly reviewing the emergence of China as an outward investor and some policy issues associated with this rise, this chapter reviews a few issues central to the future of the international investment law and policy regime. It then comments on several outcomes that were achieved — or initiated under — China’s G20 leadership: non-binding “Guiding Principles for Global Investment Policymaking” that could eventually form the basis of a universal framework on international investment; the Importance of investment facilitation, leading perhaps to an international support program for sustainable investment facilitation, beginning possibly with “Guiding Principles for Global Investment Facilitation”; and the creation of an additional intergovernmental platform that allows for a continued systematic intergovernmental process to discuss the range of issues related to the governance of international investment, preferably paralleled by an informal, inclusive and result-oriented consensus-building process that takes place outside intergovernmental settings.

Sustainability Scores for Investment Funds

Abstract: “Investment funds that label themselves as 'sustainable' or 'ethical' need to demonstrate that they are true to their label. Sustainability ratings for investment funds can show investors which funds are living up to their name and which are not.”

How Do Extreme Global Shocks Affect Foreign Portfolio Investment? An Event Study for India

Abstract: Foreign portfolio flows in and out of India are relevant for policymakers, and are often portrayed in the media as having a destabilizing effect on the domestic market. We use an event study approach to examine whether extreme global shocks trigger abnormal responses in foreign equity flows in and out of India, or abnormal responses in the Indian stock market. We do not find strong evidence of abnormal responses, even for the case of the global crisis of 2008.

Determinants of Foreign Direct Investment in Saudi Arabia: A Review

Abstract: Foreign direct investment is identified as the major tool for the movement of international capital. Thus, the study has employed a review research to examine the determinants of foreign direct investment in Saudi Arabia. The results are significant as they have contributed towards determinants of foreign direct investment by comparing with previous studies. The results showed that trade openness, infrastructure availability, and market size play significant role in attracting foreign direct investment within a country. The inflow of foreign direct investment has a potential to benefit the investing entity as well as the host government. It also renders economic growth and socioeconomic transformation of the country. The flow of foreign direct investment in Saudi Arabia is affected by several factors including growth rate, GDP, exports and imports. It is the duty of the government to ensure the attractiveness of their country to maintain maximum flow of foreign direct investment, as it promotes sustained long-term economic growth by increased investment in the human capital.