Money Flows to Emerging Markets

We often say that the global growth story is perhaps the planet’s most potent economic driver, and this opportunity is not lost on investors.

The Financial Times recently published an interactive map showing the growth of net private capital inflows into the key emerging market regions going back to the mid-1990s and through booms, busts and various regional fiscal and monetary crises.

Back in 1995, the combined net capital inflows to Latin America, Eastern Europe, Africa/Middle East and Asia ex-Japan was roughly $250 billion. A decade later, the same net inflow went into Eastern Europe alone and the total global figure topped $600 billion.

The peak is pictured above – in 2007, net private capital inflow totaled more than $1.2 billion. Then came the Great Recession – in 2008, the number was less than half, with Asia falling from $413 billion to $107 billion. The net inflows are estimated at some $700 billion this year and about $750 billion in 2011.

Overall takeaway – global emerging markets are now well-established as an important asset class in the eyes of the investment community as the financial systems in these countries have matured and government policy changes have removed many obstacles that had impeded foreign investors.

And given GDP growth projections that far surpass those of the developed economies, the appeal of emerging markets is not likely to change any time soon.

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About Frank Holmes 282 Articles

Affiliation: U.S. Global Investors

Frank Holmes is CEO and chief investment officer of U.S. Global Investors, Inc., which manages a diversified family of mutual funds and hedge funds specializing in natural resources, emerging markets and infrastructure.

The company’s funds have earned more than two dozen Lipper Fund Awards and certificates since 2000. The Global Resources Fund (PSPFX) was Lipper’s top-performing global natural resources fund in 2010. In 2009, the World Precious Minerals Fund (UNWPX) was Lipper’s top-performing gold fund, the second time in four years for that achievement. In addition, both funds received 2007 and 2008 Lipper Fund Awards as the best overall funds in their respective categories.

Mr. Holmes was 2006 mining fund manager of the year for Mining Journal, a leading publication for the global resources industry, and he is co-author of “The Goldwatcher: Demystifying Gold Investing.”

He is also an advisor to the International Crisis Group, which works to resolve global conflict, and the William J. Clinton Foundation on sustainable development in nations with resource-based economies.

Mr. Holmes is a much-sought-after conference speaker and a regular commentator on financial television. He has been profiled by Fortune, Barron’s, The Financial Times and other publications.

Visit: U.S. Global Investors

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