IntaCapital Swiss - Global Investment Trends

Global Investment Trends

In 2015 there was a resurgence in foreign direct investment. There was a growth of approximately 40% since the global and economic crises experienced in 2008.

In 2015 there was a resurgence in foreign direct investment. There was a growth of approximately 40% since the global and economic crises experienced in 2008, this equates to around $1.8 trillion. It has been agreed that a slurry of cross border mergers and acquisitions (M&As) has been the main driving factor which has seen M&As rising from $432 billion to $721 Billion Greenfield investment was steady at a value given of $766 billion.

The reconfiguration of many major corporations has been attributed to this growth. Even though these configurations have seen huge movements in balance of payments, there has nevertheless been little change in actual operations. Also, even if these reconfigurations by the Corporations is discounted, there is still an increase of about 15% albeit more moderate.

At $962 billion it can be seen that the flow of foreign direct investment to developed countries has doubled. IN actual fact, with global foreign direct investment up from 41% in 2014 to levels seen last year to 55%, it can be concluded that developed countries have tipped the balance in their favour. Reports coming from Europe have shown strong inward bound FDI. At a relatively low level in 2014, foreign direct investment into the United States has practically quadrupled.

At 9% higher than figures in 2014, developing economies have seen foreign direct investment inflows reach $765 billion. The largest recipient region in the world as of 2016 saw foreign direct investment into developing Asia with a figure over half a trillion $. Whereas figures show that the inflows have declined in areas such as Latin America, the Caribbean and Africa. Of the top 10 Host economies for foreign direct investment inflows, half of them are developing economies.

Despite a jump to 33% to $1.1 trillion outward FDI from developed economies still saw a 40% shortfall from a peak seen in 2007. Europe has become the world’s largest investing region with flows reaching $576 billion. Remaining static the flows of FDI by MNEs stayed close to the level seen in 2014.

With an increase in manufacturing, there has been a decrease in FDI activity with the primary sector. Cross border M&As in manufacturing have seen their share rise over 50% in 2015, mainly due to a flurry of deals. As profit margins got smaller in part due to a steep fall in reinvested earnings alongside a decline in commodity prices, the share in the primary market decreased as capital expenditure reduced. 60% of global FDI is held by the services market.

In 2016 it was expected that there will be a decline in FDI flows of between 10-15%. Factors that have lead to this conclusion are numerous but encompass the decline in MNE profits, more effective policies to curb deals of tax inversion, poor growth in the commodity exporting countries, a weakness in aggregate demand and the fragile global economy. Due to an expected increase in global growth, 2018 is predicted to see FDI flows exceed $1.8 trillion with growth also likely to see an increase through 2017.

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