Whether the FII’S ( Foreign Institutional Investors) activities involve pulling out by selling their holdings or moving in by buying up equity, yet it is a known fact that the share of FII’S in the total turnover of the capital markets, hovers at around the one third mark. According to the World Bank’s Global Development Finance 2008 which has been released recently, there has been a surge in private capital flows to the developing countries from $165 billion in 2001 to a record $1.3 trillion in 2007. This is because of the returns which were better in these so called developing countries.
A recent report of the Institute of International Finance (IIF), a consortium of 370 banks and financial sector giants, says that the bulk of foreign capital inflows are concentrated in about 35 countries called emerging economies. These include China, India, South Korea in Asia, most Latin American countries, most east European countries and North African countries etc. The emerging markets received an estimated $782 billion in private capital flows in 2007.
The concerned private capital reservoirs can be used to buy up companies or play the stock market or be given out as loans. The bulk of it is used as direct investment in companies. Investment in stock markets has rocketed $0.84 billion to over $43 billion to over $483 billion. The 2008 report predicts that the private funds flows to emerging economies will decline to about $731 billion. The reduction will mainly be in portfolio investment and credit, while direct investment in equity will continue to grow. I now end here by saying that in the near future, the hot money is going to be even more frisky and whimsical