International portfolio investments (update)

6 December 2017

International portfolio investments picked up in 2016 amid a push towards the United States and a modest recovery towards emerging markets. The latest IMF Coordinated Portfolio Investment Survey (CPIS) shows the total stock of cross-border portfolio investments in equity and debt securities, excluding securities held as international reserves, in December 2016 at 42.9 trillion (57 percent of world GDP) up from US$39.9 trillion in 2015 (54 percent of world GDP).1 The shifts in cross-border portfolio holding reveal a further decline of Euro Area securities and somewhat more concentrated portfolio holdings. Overall, total international portfolio investments have still not recovered from their 2007 peak relative to world GDP (Chart).

IMF CPIS international portfolio investment December 2016

The U.S. saw a significant increase in its share in international portfolio investments of 24.5 percent of the total up in 2016 from 19.5 percent in 2015. The Euro Area remains the largest recipient region with 28.1 percent of total portfolio investments but well below its peak of 35.1 percent in 2014. Emerging markets maintain some upward momentum but their share in total portfolio investments at 10.8 percent in 2016 remains below their 2012 peak of 12.7 percent (Table).

IMF CPIS international portfolio investments

Advanced economies and emerging markets excluding off-shore centres show different investment patterns. Advanced economies hold predominantly Euro Area securities and maintain a significantly lower share in Euro Area core countries. Emerging markets maintain the largest share of international portfolio investments in the U.S. Holdings of Euro Area core securities remain relatively less important compared with advanced economies. Emerging markets, excluding off-shore centres, continue to invest significantly below their 2007 peak in emerging markets. However, with an increase to 4.4 percent of the share of countries’ portfolio holdings, excluding off-shore centres, emerging markets have been advancing as investors.

International portfolio holdings remain a potent indicator of international financial integration. The gradual upward movement in the share of investments relative to world GDP seems to be an encouraging sign that international capital markets integration remains broadly intact. The latest data seem to suggest that emerging markets may increasingly be shaping the direction of financial integration.