Foreign portfolio equity investment

Liberalization and globalization have stimulated the development of closer financial (as well as trade) relations between developed countries and emerging markets. Foreign direct investment (FDI) has become an important source of capital inflows for emerging markets since the late 1980s. Another is foreign portfolio equity investment (FPEI), which has spread to emerging markets as regulatory barriers to capital movements have fallen. By contributing or participating in the equity capital of firms, both FDI and FPEI can enhance the development of the enterprise sector in host countries. This chapter addresses trends and issues relating to FPEI flows to emerging markets. In the first section, the linkages between FDI and FPEI are analysed. The second section discusses the trends in FPEI flows to emerging markets; and the third section provides an overview of the main mechanisms through which these flows are channelled (these are elaborated further in annex C at the end of this volume). The conclusions briefly raise a number of issues relating to FPEI that require further in-depth analysis.

Sustainable Development Goals:

Decent Work and Economic Growth