Private capital flow into emerging markets to post second highest level ever, says IIF

By Reshmi Basu

New York, March 30 - Private capital flow in 2006 into emerging markets is expected to record its second highest level ever, according to a new report published by the Institute of International Finance (IIF).

Flows into the asset class are expected to reach $357 billion this year, down from the record $400 billion posted in 2005.

This year's drop reflects the substantial pre-financing completed by sovereigns last year in anticipation of tighter global market conditions, the IIF reported.

"The scale of net private capital flows to emerging markets is also due to abundant international liquidity and the reach for high yields by investors," said William Rhodes, senior vice chairman of Citigroup Inc., in a news release.

Nonetheless, while flows remain robust, members of the IIF warned investors about increasing emerging market risks such as large global current account imbalances, oil market uncertainties, and a range of political concerns.

"We are seeing spreads on sovereign bonds at record low levels relative to U.S. Treasury bonds and I find it a matter of concern that there appears to be insufficient differentiation by investors between emerging market economies," Rhodes added.

Additionally, IIF forecasts growth this year in emerging Asia at over 7% for the fifth consecutive year, while emerging Europe is expected to grow 5%.

Meanwhile Latin America's growth will be propped higher by Brazil and Mexico's projected high GDP growth in 2006. Regional economic growth is expected to increase to 4.2%, up from 4% in 2005.

And in the Africa/Middle East region, growth is expected to increase to more than 5% in 2006.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.