FDI’s Sullied Solid Course
The UN’s initial 2014 global FDI reading was down almost 10 percent to $1.25 trillion on 15 percent advanced and 50 percent transition economy drops with future solid performance “distant” according to the January report. However the developing market total of $700 billion was a new record at 55 percent of inflows as China’s rose 3 percent to $125 billion to bump the US as lead destination. The EU’s grab was up 15 percent to almost $275 billion, one-quarter to the UK, while France and Germany had $10 combined in outflows mainly due to intra-company loan movements. Emerging Asia took close to $500 billion, with India increasing 25 percent to $35 billion and Myanmar doubling while Vietnam fell. Turkey as part of West Asia dipped to $12 billion on financial sector weakness, while North Africa was off 15 percent and the Sub-Sahara was flat despite cross-border consumer-related M&A growth in Nigeria and elsewhere, UNCTAD commented. Latin America reversed a 4-year climb with a 20 percent slip to $150 billion, as lower commodity prices hit extractive industries. In Mexico AT&T divested its stake in America Movil, and Argentina and Venezuela plummeted on parent company earnings repatriation. In Chile mining interest softened and together Colombia and Peru experienced $25 billion shrinkage. In Central Europe and the CIS the Russia-Ukraine conflict and sanctions halved the sum to $45 billion, although Azerbaijan and Kazakhstan hydrocarbon participation advanced. International mergers improved 20 percent to $385 billion, one-third in finance, including an intra-African deal with Nedbank of South Africa’s stake purchase in Togo-based Ecobank. Greenfield projects were ahead marginally to over $600 billion with transition economies excluded from the trend and negative geo-political and GDP growth prospects for emerging markets generally likely to be near-term deterrents, the review concludes.
The FDI lethargy was in contrast to 2014’s 15 percent private equity fund-raising rise to $45 billion across all regions with Latin America and Sub-Sahara Africa getting one-quarter, according to industry association EMPEA, as emerging markets were also 15 percent of the global total. Capital deployment in turn was a record $35 billion, a 25 percent annual spurt. Asia was the focus for two-thirds of funds, and China had two $1 billion-plus deals for oil distributor Sinopec Marketing and tech firm Xiaomi. Larger regional vehicles dominated, with a dozen funds mobilizing $1 billion each including Carlyle, Advent International and Helios. The mean fund size was $450 million and a few first-time entrants were successful, according to the study. Venture capital allocation was unprecedented at $7 billion for 700 transactions, with China leading the pack. Southeast Asia’s volume doubled and India garnered $200 million for e-commerce provider Flipkart. Brazil, Lithuania, South Africa and the UAE were host to other major investments, and consumer services remain the most popular sector. Retail, media and travel companies accounted for one-third of stakes and private versus public equity may be the most solid route with the FTSE Emerging Markets Index at only 10 percent consumer listings, EMPEA notes.
