Asian investment surges despite slowdown

Activity may be slowing in the economies to our north, particularly China, but that doesn’t mean Australia should be switching its investment thinking onto other markets.

A recent United Nations report on direct investment by emerging economies shows a big surge as companies based in emerging markets sought new opportunities.

The flow of funds from those economies hit a record $US484 billion in 2014, an increase of 30 per cent on the year before, according to figures compiled by the Geneva-based UN Conference on Trade and Development (Unctad).

And the charge was being led by Asian investors, with that region accounting for $US440 billion in outbound investment leaping over rivals from North America and Europe to become the world’s biggest regional source of foreign direct investment.

Naturally China was in the forefront of the charge being only second to the US in the national league tables for foreign direct investment with Hong Kong and the mainland accounting for $US266 billion in outbound funds in 2014.

A decade ago Mainland China saw 18 times more inbound than outbound investment, but last year it finally reversed.

With China now championing the homegrown Asian Infrastructure Investment Bank – and asking Australia to participate – Beijing is continuing to build links across the country into central Asia and Europe.

Unctad expects this trend to continue.

China was becoming more outward looking in its investments because of slowing growth in its own economy, which was also the case for other emerging economies including Russia. Despite the ratcheting up of sanctions and the crisis in Ukraine, Russian companies invested $US56 billion offshore in 2014, the same as France.

Investments by multinational companies in developed economies such as the EU, US and Japan were flat last year at $US792 billion. While there had been “modest increases” in individual investments by European and US companies.

Interestingly, more than half of the investments made in 2014 by companies from developing economies were into equity and amounted to new projects or acquisitions and were paid for by record cash reserves held in foreign subsidiaries.

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