Determinants of Foreign Portfolio Investment and Its Effects on China

Abstract

Foreign portfolio investment consists of securities and other capital inflows of assets possibly held by other foreign countries. Foreign Portfolio Investment (FPI) provides the investor with indirect ownership of financial assets. This study intends to investigate the economic factors which attract the investors to invest in the host country. We observed what the impact of FPI determinants on the Chinese economy. To elaborate our results we used multiple regression models by using E-views. This study investigates the effects of FPI and its determinants of the economic structure of China. The data of FPI, GDP, FDI, EXD and P has been taken from the World Bank. GDP and External Debt are the strong determinants of the FPI, the Exchange Rate, Population shows that these variables have a significant impact on the FPI. The investors speculate the high returns, more secure investors' rights and feel safer to invest in the country.

Macroeconomic Variables and Foreign Portfolio Investment Volatility in Nigeria

“…Hence, if home economy produced less goods and services, foreign investors might see such economy as risky. This is in consonance with Haider, Khan and Abdulahi (2016); Atobrah (2015); Ahmad, Draz and Yang (2015), who noted that domestic economic growth influences foreign investors' decision to invest in an economy. Also, Yahya, Shujahat and Muhammad (2015) found that FPV was associated with dismal economic performance of recipient economy.…”

“…This is in line with the findings of Ibrahim and Akinbobola (2017), Okpoto (2015), and Baghebo and Apere (2014. The association between inflation rate and foreign portfolio investment in China had been observed by Haider, Khan and Abdulahi (2016). Negative and insignificant relationship between foreign portfolio investment and the stock market development had been observed by Abel, Ebele and Ndi (2009).…”

The effect of the adoption of International Financial Reporting Standards on foreign portfolio investment in Africa

“…UNCTAD (1999) states that FPI involves a transfer of financial assets by way of investment by resident individuals, enterprises, and institutions of one country in securities of another country, either directly in the assets of the companies or indirectly through financial markets. Furthermore, Haider et al (2016) explain that FPI is the capital inflow into the country through foreign investment. It is in the form of stocks and shares securities or debt securities in the host country.…”

“…The foreign investors speculate on the boom in the market and invest by keeping sight of the economic variables. Haider et al (2016) point out that the trends related to FPI worldwide, especially in the developing economies, have changed in the last century. Daly and Vo (2013) state that the trend of foreign investors investing in a foreign country in the last decade is encouraging.…”

“…AyodeleFolorunso et al (2019) explain that developing counties, including African countries, would need more flows of FPI to bridge the gap between savings and foreign exchange and to solve the prevailing insufficiency of foreign capital in Africa that hinders the progress of economic development. In recent times, primarily, due to advancement in technology, FPI has been one of the most important foreign investment types in many countries (Haider et al, 2016). Aziz et al (2015) report that FPI is useful in obtaining higher investment returns and a reasonable decrease in investment risk because of its dynamic nature of international investment diversification.…”