Global Portfolio Asset Holdings Decrease Amid Elevated Uncertainty
IMF Blog, March 20, 2023
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Bibliographic details
- Authors: Evrim Bese Goksu, Alicia Hierro, Rita Mesias, Wilson Phiri
- Published: March 20, 2023
Key findings
- Global portfolio investment asset holdings decreased by 15 percent in the first half of last year, the most since 2008.
- The decrease is attributed to both the reduction in investments and valuation effects.
- The top 10 portfolio investment holding countries, collectively accounting for about two-thirds of global positions tracked by the CPIS, experienced a sharp decline since the last reporting period six months earlier.
- The Cayman Islands’ portfolio investment holdings increased by 6.2 percent due to investments in the United States and Japan.
Drivers of the decline
- Elevated risk aversion amid increasing energy prices weighed on capital markets and portfolio investments.
- Heightened geopolitical risks contributed to reduced cross-border portfolio activity.
- Rising inflation risks and tightening monetary policies in advanced economies further depressed sentiment and holdings.
Country- and flow-specific observations
- The drop was largely driven by declines in investments by:
- the United States (notably in Germany and the Netherlands),
- Luxembourg (notably in the United States, Ireland, and Japan),
- Ireland (notably in the United States and United Kingdom),
- Japan (mainly in the United States).
- By contrast, the Cayman Islands recorded a 6.2 percent increase in portfolio investment holdings driven by investments in the United States and Japan.
About the Coordinated Portfolio Investment Survey (CPIS)
- The IMF’s CPIS collects data on portfolio investment assets from more than 80 countries.
- It is the only global bi-annual survey of cross-border portfolio holdings by counterpart economy and by sector of holders and nonresident issuers.
- The CPIS shows:
- which countries invest in a particular country,
- how the investments are distributed across institutional sectors,
- the currency distribution of such assets.
- Complete results are available at http://data.imf.org/CPIS.
Risks and macroeconomic implications
- Portfolio investments tend to be volatile and, if not well monitored and managed, can trigger macroeconomic challenges such as:
- overheating of the host economy,
- loss of export competitiveness due to exchange rate appreciation,
- higher vulnerability in the event of a crisis.
Evrim Bese Goksu, Alicia Hierro, Rita Mesias, Wilson Phiri — March 20, 2023