Portfolio Investment: Coordinated Portfolio Investment Survey (CPIS):Report on Results of 1997 Survey

The Results of the 1997 Coordinated Portfolio Investment Survey have been included in a special publication, released in January 2000. The publication contains: (1) general tables that show how the 29 participating countries allocated their portfolio investment assets among major partner countries; (2) country tables containing all CPIS data collected at the national level and geographical details on additional portfolio investments made by some entities not originally covered in the survey; and (3) descriptions of the essential features of CPIS implementation in each country.

Countries participating in the CPIS collected information on portfolio investment assets (specifically cross-border claims mainly in the form of equity and long-term debt securities) as at end-December 1997. The data were disaggregated by type of instrument (equity and debt securities), with full geographical detail by country of issuer. The CPIS represented, for the majority of the participating countries, the first time that such data had been collected in accordance with standardized definitions and methodologies and this approach enhanced data quality and comparability. Only two thirds of these countries already compiled an international investment position statement, mostly without any geographic details. In order to meet the requirements, major changes and refinements were introduced by most compilers, even those who already collected stock data attributed geographically. Overall, the 1997 CPIS covered portfolio investments made by more than 4,000 banks, 8,000 non-bank financial institutions, and 13,000 non-financial enterprises.

CPIS-reported holdings of portfolio investment assets in the form of equity and long-term debt securities amounted to nearly US$5.2 trillion at the end of 1997 (Table 1). The United States, United Kingdom, and Japan were the largest investing countries, accounting for almost 68 per cent of such holdings. The shares of the Netherlands, Italy, and France were each within a range of 4-6 per cent of the total, and those of Sweden, Ireland, Canada, Bermuda, and Belgium were each within a range of 1-3 per cent of the total. On average, portfolio investment assets were almost equally allocated between equity and long-term debt securities. About 60 percent of investors' holdings of foreign long-term securities were related to issuers resident in advanced economies. A significant proportion, amounting to some 12 percent, related to securities issued by emerging market countries (mainly Argentina, Mexico, Brazil, Ghana, Korea, China, and Hong Kong SAR). About 4 percent were allocated to offshore centers (Cayman Islands, British Virgin Islands, Netherlands Antilles, and Jersey), and international organizations accounted for about 3 percent. The remaining countries accounted for only 0.2 percent of total reported portfolio investment holdings.

Table 1. Global Discrepancies in Portfolio Investment Assets and Liabilities

(End-December 1997, trillions of US dollars)

1/ As reported by the twenty nine participating countries
2/ Including adjustments for non-reporting countries and international organizations

Sources: 1997 CPIS, BIS, IMF, other international organizations, and Fund staff estimates

These data are analyzed in Analysis of 1997 CPIS Results and Plans for the 2001 Survey intended to complement the publication of the results of the 1997 CPIS. In particular, they have been used to investigate two issues:

(1) First, global imbalances in portfolio investment assets and liabilities have been reviewed in the light of the evidence made available by the 1997 CPIS and some additional sources of information.¹

(2) Second, the data provided by the eight countries that collected geographical details on their portfolio investment liabilities have been compared with the corresponding assets reported by their 1997 CPIS partners.

Regarding the first issue, the CPIS permitted the identification of additional portfolio investment holdings of US$750 billion. The newly identified assets were largely attributable to investors resident in European and North American countries, reflecting new surveys conducted in some countries for the 1997 CPIS (e.g., Canada, Ireland, Italy, and Spain), and a new benchmark survey in the United States. Bermuda, the only offshore financial center participating in the CPIS, accounted for US$133 billion. The CPIS also permitted the identification of new liabilities of some US$500 billion, mostly related to offshore centers (45 percent) and emerging market countries (36 percent). As a result of these adjustments, it could be estimated that outstanding portfolio investment liabilities in both equity and long-term debt securities were $9.4 trillion at the end of 1997, and outstanding portfolio investment asset positions were $7.7 trillion. The difference of $1.7 trillion represented about 18 percent of total liabilities.

An analysis of bilateral asymmetries (which could only be undertaken for the eight countries that collected geographically detailed data on their own portfolio investment liabilities: Australia, Indonesia, Israel, Japan, Malaysia, Netherlands, Portugal, and Spain) indicated that a substantial part of external liabilities was attributed to intermediary countries with large international financial markets. These results confirmed the view that a reliable country breakdown of external liabilities could not be calculated from the liability side.

As noted, the size of the global discrepancy between portfolio investment assets and liabilities remained substantial. This could be attributed to a lack of coverage of holdings of portfolio investment assets by households (which some participating countries in the 1997 CPIS considered to be a critical weakness), and the lack of data sources for offshore financial centers and some countries, for which no estimate could be made. These considerations underscore the need for a more complete participation of major investing countries in future surveys, including offshore financial centers, which would address the remaining sources of under-reporting of global portfolio investment assets, and provide an indication of the reliability of the global data for portfolio investment liabilities.

In addition to shedding some new light on the size of global discrepancies in portfolio investment positions, the 1997 CPIS also provided a number of benefits. The main benefits were that it:

(1) Proved that a coordinated effort could be successfully organized across a large number of countries with respect to the scope, coverage, timing, definitions and concepts used in the compilation of data.

(2) Provided an effective and efficient vehicle for establishing and spreading good methodological standards world-wide.

(3) Facilitated a greater understanding of country practices with respect to survey design and alternative approaches to data collection and the exchange of experience in this regard.

(4) Allowed countries to gain confidence in the data.

(5) Facilitated data exchange.

In all of this, it has served to spread awareness of the fifth edition of the Balance of Payments Manual (BPM5) and promote and facilitate its implementation. As more countries take steps to compile an annual international investment position, the likely outcome is the improved reporting of stocks and flows of portfolio investment and a reduction in global discrepancies.

¹ These additional sources comprised:

(1) A Survey of Country Distribution of Long-Term Securities held as Foreign Exchange Reserve Assets (SEFER), conducted by the Fund.

(2) A Survey of Foreign Equity and Long-Term Debt Securities held by Selected International organizations, mainly in respect of pension funds, also conducted by the Fund.

(3) Data from the Bank for International Settlements (BIS) on banks' holdings of debt securities reported on a residency basis.

When added to the data reported in the 1997 CPIS, these sources brought the total of reported portfolio holdings, for which a geographic attribution was available separately for equities and bonds, to US$6.1 trillion.

Copies of the Results of the 1997 Coordinated Portfolio Investment Survey are available from IMF Publications in English, for a fee.

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See also side-bars to this page for additional information on the 1997 CPIS survey.