MercoPress. South Atlantic News Agency

Good investment prospects in emerging markets

Investments in emerging markets will continue in 2005 pushed by capital influx mainly to China and greater activity in debt bonds trading, according to the Institute of International Finances, an organization representing 300 international banks which last week met in Madrid, Spain.

Private investment during 2005 is expected to reach 311 billion US dollars, up from the 304 billion of last year, the highest since 1997 when the outbreak of the Asian financial crisis. Last January IIF estimated that private investment in emerging markets during 2004 had reached 279 billion US dollars and this year would drop slightly to 276 billion.

"China, Mexico and the new European Union members are the countries expected to most benefit from foreign investments", said William Rhodes, first vice-president of the IIF managing council and Citigroup senior vice-president.

Another point underlined at the meeting was that emerging markets expansion rate is above that of developed countries. The Brazilian economy expanded 5,2% last year; Turkey 9%, China 8%, while the United States growth was 3,9% and the Euro zone 2%, with this year's estimate down to 1,6%.

However IFF warns that the increase in investment could also be hiding a less favourable world economic outlook. Countries borrowing heavily will be conditioned by raising interest rates and a slowing of economic activity under the impact of the ever higher energy prices.

This according to IFF has already spilt over to "spreads", (risk rate), the additional interest points demanded by takers of emerging markets bonds which from an all time average record of 330 points early March, it has steadily began to increase and is already over 395 points. Each point is equivalent to 0,01%.