Emerging markets draw $502 billion

Washington, January 19:

Investors and banks pumped half-a-trillion dollars into emerging markets in 2006, with China and other Asian economies accounting for the lion’s share of such money flows, the Institute of International Finance said Thursday.

The 2006 figure of $502 billion was just slightly below the record level of $509 billion in 2005, according to an IIF report.

The report by the global association of big financial institutions and banks, showed investors remained upbeat on countries with greater economic risks in 2006, but that this trend will likely moderate somewhat in 2007.

The IIF, chaired by Deutsche Bank AG chairman Josef Ackermann, said the volume of private capital flows to emerging markets is likely to total 469 billion dollars in 2007.

Although this would mark a slowing of overall capital flows, to the 30 countries covered in the survey, the IIF said it would still represent the third highest level of flows recorded.

The institute, however, cited several risks to its outlook, including “uncertainties about the duration and severity of the ongoing housing slump in the United States, as well as its impact on the rest of the economy.”

The IIF said net private capital flows of $197 billion went to Asia in 2006, while emerging European economies acccounted for $218 billion. Some $46 billion went to Latin America and $31 billion to Africa.

The IIF said that Asian economic powerhouse China would likely continue to be the recipient of the largest share of net direct investment.

“China will continue to dominate in this category in the near future, accounting for 55 billion of total net direct investment flows to emerging markets,” the report said.