Emerging markets prove to be popular for investors

International Financial Services London (IFSL) has reported that inflows of external finance to emerging markets increased again in 2006 to $1065 billion compared with $802 billion the previous year.

The report shows that inflows have recovered steadily from a low level of $183 billion in 2002 with Asia being the biggest destination for such external finance, followed by central and Eastern Europe, Latin America and the Middle East.

The UK is a major source of emerging markets’ external finance, with a leading 16% share of their international bank finance, including an 11% share of portfolio investment, followed by the US with 36%.

The London Stock Exchange is the most important destination with 195 foreign listings of companies from emerging markets, while the New York Stock Exchange is second with 177 foreign listings.

Finally, IFSL’s report sees considerable scope for further growth in external finance as emerging markets make up for only 7% and 9%, respectively, of global inflows of portfolio investment and international bank lending, a reflection of their capital markets being at an earlier stage of development. In comparison, they attracted a 36% share of foreign direct investment in 2006.

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