In the wake of the eroding economic borders for capital mobility, capital flows are going to be faster and in greater volume in the coming years – predicts McKinsey. By 2010, financial assets are expected to touch a new high and global capital flows are expected to touch $213 trillion. This volume means an annual growth of 8.75 % when compared to the previous five years, says McKinsey’s report on global capital flows.
The OECD countries comprising European countries, the US and Japan are the owners of around 83% of the world's financial capital. The report points out the declining role of Japan in global capital flows. Japan is overtaken by China in the case of both inward and FDI and in the case of outward FDI, China is emerging as a power to reckon with.
According to the financial research group, stocks continue to be the driver of global financial assets. The implication of the prediction is that financial investment in the form of FII rather than real investment in the form of FDI will dominate the capital inflows into the BRIC region. The report observes that financial assets across the globe account for more than three times the global GDP based on 2005 figures where financial assets accounted to $ 140 trillion. The total value of world financial assets had moved up from $53 trillion in 1993 to $118 trillion in2003 showing an annual growth rate of 8.3 %.
The findings of McKinsey on the behavior of the households are also interesting. According to the group, more households across the globe are buying equity by sacrificing bank deposits. The households find it investment in securities rather than saving in bank deposits is more rewarding. According to the group, the main reason for increase in global liquidity is investment in global financial assets is increasing at the expense of bank deposits.
The McKinsey report states that global liquidity continues to be in the expanding mode in coming years. The report predicts some activity in the corporate debt market of the emerging economies. Corporate debt market in performing markets will be the next investment destination. The hedge funds, gold funds and real estate funds are also to thrive. But the report is less analytical about the developments in the global commodity markets.
Tags : capital,flows,volume
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