Investigating the determinants of foreign portfolio investments in emerging markets

Abstract

This study explored the determinants of foreign portfolio investment (FPI) in emerging markets, using panel data analysis. In all three models, main data analysis using the dynamic generalized methods of moments (GMM) approach showed that FPI was positively and significantly by its own lag. This result confirms the view in the literature (Barrell and Pain. 1999; Wheeler and Mody. 1992; Saini. 2000), which argues that existing foreign investors attract other foreign investors as a result of the positive spillovers that they generate. Financial development also had a positive and a significant effect on FPI in all the three models under the fixed effects, random effects and the fully modified ordinary least squares (FMOLS). Moreover, a significant positive relationship running from financial development towards FPI was also detected in model 1 under the pooled OLS method. The findings resonate with those of Bartels et al. (2009), whose study observed that financial markets improve international mobility of capital through their ability to make use of timely, cheaper and efficient to prospective foreign investors. Model 2 produced results that showed that the impact of financial development on FPI was significantly negative under the pooled OLS approach, in line with Gordon and Gupta’s (2004) findings. Trade openness positively affected FPI in a significant manner under the FMOLS, random and fixed effects in all the three models. Similar results were observed in model 1 and 3 under the pooled OLS approach. These results agree with Dobbs et al (2013) that openness to trade addresses any obstacles that might hinder the movement of international capital from one country to another. The complementarity between openness to trade and financial development had a significant negative impact on FPI in all the three models under the random effects, fixed effects and FMOLS. This result is similar to Al-Smadi’s (2018) finding that foreign investors can easily sell off their investments if financial markets are developed and liquid, especially in the presence of high levels of trade openness that facilitates the movement of capital across country borders (Dobbs et al. 2013). In contrast, model 2 under the pooled OLS showed that the combination between financial development and trade openness had a positive significant effect on FPI. This finding agrees with literature which notes that both trade openness and financial development separately and individually enhance FPI. The expectation therefore is that the combination of trade openness and financial development in a particular single country leads to greater FPI inflows. In model 1, the FMOLS, random and fixed effects showed that exchange rates had a significant positive impact on FPI, something that was found in all three models under the pooled OLS approach. This finding supports Haider et al.’s (2016) argument. Models 1, 2 and 3 showed a significant positive relationship running from economic growth to FPI under the fixed effects, FMOLS and pooled OLS econometric estimation techniques. Similar results were observed in models 1 and 2 under the random effects approach. The finding echoes Al-Smadi’s (2018) argument on the relationship between economic growth and FPI. In contrast, the dynamic GMM method showed that economic growth had a negative significant impact on FPI, supporting Leong and Wickramanayake’s (2004) argument that in the presence of high levels of economic growth, local investors prefer to buy back domestic securities from foreign investors, triggering a deleterious effect of FPI inflows. In model 1, the impact of savings on FPI was found to be significantly negative under the fixed effects, random effects, pooled OLS and FMOLS approaches. Similar results were found in model 2 under the random effects and the pooled OLS. These findings contradict the available literature (Masood and Mohsin. 2002; Abdelhafidh. 2013; Ferreira and Laux. 2009) but are similar to those of Al-Smadi (2018), who argues that higher levels of inflation wipe out the value of not only return on capital but also of the original capital invested. Inflation had a significant negative effect on FPI in models 1 and 2 under the pooled OLS approach. Human capital development had a significant positive influence on FPI in models 1 and 2 under the pooled OLS and the dynamic GMM approaches. This result supports Dunning’s (1988) argument that locational advantages exert a significant influence on foreign direct investment or any form of foreign investment. Human capital development was found to be a locational advantage for foreign investment in this case, as Tsaurai (2017a) found.

In hierdie studie is die bepalers van buitelandse portefeuljebelegging (BPB) in ontluikende markte aan die hand van ʼn paneeldataontleding verken. In al drie die modelle het ʼn hoofdataontleding volgens die benadering van dinamiese, veralgemeende metodes van momente (VMM) aangetoon dat sy eie vertraging BPB positief en opmerklik beïnvloed. Hierdie uitslag onderskryf die bevindings in die literatuuroorsig (Barrell & Pain 1999; Wheeler & Mody 1992; Saini 2000). Hiervolgens word aangevoer dat bestaande buitelandse beleggers ander buitelandse beleggers deur hulle positiewe surplusse aanlok. Ook finansiële ontwikkeling het in al drie die modelle onder die benadering van vaste en ewekansige effekte en volgewysigde gewone kleinste kwadrate (VGGKK) ʼn positiewe en opmerklike effek op BPB gehad. Daarby is ʼn opmerklik positiewe verband, wat van finansiële ontwikkeling tot BPB strek, onder die saamgevoegde gewone kleinstekwadrate- oftewel GKK-metode in model 1 bespeur. Hierdie bevinding staaf dié van Bartels et al (2009) dat finansiële markte die internasionale mobiliteit van kapitaal verbeter deurdat hulle tydig goedkoper en doeltreffende inligting aan voornemende buitelandse beleggers verstrek. Die uitslag van model 2, dat die uitwerking van finansiële ontwikkeling op BPB onder die saamgevoegde GKK-benadering opmerklik negatief is, strook met die bevindings van Gordon en Gupta (2004). Oop handel het BPB onder die VGGKK, ewekansige en vaste effekte in al drie die modelle op ʼn opmerklike wyse positief geaffekteer. Soortgelyke uitslae is in model 1 en 3 onder die saamgevoegde GKK-benadering waargeneem. Hierdie uitslae stem ooreen met dié van Dobbs et al (2013), naamlik dat oop handel baie hindernisse uit weg ruim wat die beweging van internasionale kapitaal van een land na ʼn ander belemmer. Die komplementariteit tussen oop handel en finansiële ontwikkeling het ʼn opmerklik negatiewe uitwerking op BPB in al die modelle onder die benadering van ewekansige effekte, vaste effekte en VGGKK gehad. Hierdie uitslag klop met Al-Smadi (2018) se bevinding dat buitelandse beleggers hulle beleggings maklik van die hand kan sit as finansiële markte ontwikkeld en likied is, en in die besonder as handel in hoë mate oop is en kapitaal met gemak oor landsgrense heen kan beweeg (Dobbs et al 2013). In teenstelling hiermee het model 2 onder die saamgevoegde GKK getoon dat die kombinasie van finansiële ontwikkeling en oop handel ʼn opmerklik positiewe effek op BPB het. Hierdie bevinding stem ooreen met dié in die literatuur dat oop handel en finansiële ontwikkeling gesamentlik en afsonderlik BPB aanwakker. Dienooreenkomstig word verwag dat oop handel en finansiële ontwikkeling groter BPB na in ʼn land sal laat vloei. Die VGGKK en ewekansige en vaste effekte het in model 1 getoon dat wisselkoerse ʼn opmerklik positiewe uitwerking op BPB gehad het. Dit het trouens in al drie die modelle onder die saamgevoegde GKK-benadering voorgekom. Hierdie bevinding beaam Haider et al (2016) se argument. Model 1, 2 en 3 het ʼn opmerklik positiewe verband, wat van ekonomiese groei tot BPB strek, onder die vaste effekte, VGGKK en saamgevoegde GKK ekonometriese ramingstegnieke aangedui. Soortgelyke uitslae is in model 1 en 2 onder die benadering van ewekansige effekte waargeneem. Hierdie bevinding sluit aan by Al Smadi (2018) se argument oor die verband tussen ekonomiese groei en BPB. Hierteenoor het die dinamiese GMM-metode getoon dat ekonomiese groei ʼn negatiewe, opmerklike uitwerking op BPB gehad het. Dit staaf Leong en Wickramanayake (2004) se argument dat plaaslike beleggers verkies om binnelandse sekuriteite by buitelandse beleggers terug te koop as ʼn hoë mate van ekonomiese groei aanwesig is, en dat dit ʼn nadelige effek op die invloei van BPB het. In model 1 was die uitwerking van spaargeld op BPB opmerklik negatief onder die benadering van vaste effekte, ewekansige effekte, saamgevoegde GKK en VGGKK. Soortgelyke resultate het in model 2 voorgekom onder die ewekansige effekte en die saamgevoegde GKK. Ofskoon hierdie bevindings strydig met dié in die beskikbare literatuur is (Masood & Mohsin 2002; Abdelhafidh 2013; Ferreira & Laux 2009), strook dit met dié van Al-Smadi (2018) wat beweer dat hoë inflasie nie alleen die opbrengs op kapitaal nie, maar ook die oorspronklike kapitaal uitwis. Inflasie het ʼn opmerklik negatiewe effek op BPB in model 1 en 2 onder die saamgevoegde GKK- en dinamiese VMMbenadering gehad. Die ontwikkeling van menslike kapitaal het ʼn beduidend positiewe invloed op BPB gehad in model 1 en 2 onder die saamgevoegde VKK- en die dinamiese VMM-benadering. Hierdie uitslag beaam Dunning (1988) se argument dat landsgebonde voordele ʼn beduidende invloed op direkte buitelandse belegging of enige ander vorm van buitelandse belegging uitoefen. Tsaurai (2017a) het bevind dat die ontwikkeling van menslike kapitaal in hierdie geval ʼn landsgebonde voordeel vir buitelandse belegging inhou.

Lolu cwaningo luye lwaphenya izizathu zokutshalwa kwezimali emazweni angaphandle, phecelezi (foreign portfolio investment (FPI) ezimakethe ezisafufusayo, ngokusebenzisa uhlelo lokuhlaziywa kwedatha, phecelezii-panel data analysis. Kuwo onke amamodeli omathathu, kuhlelo lokuhlaziywa kwedatha esemqoka, ngokusebenzisa izindlela eziguquguqukayo zezikhathi ezahlukene (GMM) , lokhu kuye kwakhombisa ukuthi i-FPI yathola umthelela omuhle futhi okungumthelela wayo wokushiywa yisikhathi. Lo mphumela uqinisekisa ulwazi olutholakele olumayelana nokubuyekezwa kombhalo wobuciko (Barrell & Pain 1999; Wheeler & Mody 1992; Saini 2000), okuwumbhalo okhuluma ngokuthi abatshalizimali bangaphandle abakhona baheha abanye abatshalizimali bangaphandle okuyinto edalwa yizinzuzo ezinhle ezingumphumela wokutshalwa kwezimali. Ukuthuthukiswa kwezinhlelo zezimali nakho kube nomthelela omuhle nobalulekile kwi-FPI, kuwo wonke amamodeli amathathu, angaphansi kwesimo semiphumela enqunyelwe isikhathi, angaphansi kwemiphumela yazo zonke izinhlelo eziguqulwe ngokugcwele phecelezi fully modified ordinary least squares (FMOLS) . Ngaphezu kwalokho, ubudlelwano obuhle obusemqoka, obuqala ekuthuthukisweni kwezinhlelo zezimali ukuya kuhlelo lwe-FPI, nabo lobudlelwano buye babonakala kumodeli 1, ngaphansi kohlelo lwe pooled OLS method. Ulwazi olutholakele lufana nalolo lukaBartels et al. (2009), lapho ucwaningo lwakhe lwathola ukuthi izimakethe zezimali zithuthukisa ukuthunyelwa kwezimali emhlabeni ngekhono lokusebenzisa ulwazi lwalo ngesikhathi, ngentengo ephansi futhi ulwazi olufanele, lolu lwazi luthunyelwa kubatshalizimali bangaphandle abathembisayo. Imodeli 2 ikhiqize iveze imiphumela ethi umthelela wokuthuthukiswa kwezinhlelo zezimali ohlelweni lweFPI luye lwabonakala lulubi kakhulu ngaphansi kohlelo lwepooled OLS approach, lokhu kuhambisana nolwazi olutholwe nguGordon kanye noGupta (2004). Uhlelo lwezokuhwebelana oluvulekile luye lwaba nomthelela omuhle ohlelweni lweFPI, ngendlela esemqoka kakhulu, ngaphansi kohlelo lweFMOLS, ngaphansi kohlelo lwemiphumela enqunyelwe isikhathi nohlelo olunganqunyelwanga isikhathi, kuwo wonke amamodeli amathathu. Imiphumela efana naleyo yatholakala kumodeli 1 neye 3, ngaphansi kohlelo lwepooled OLS approach. Le miphumela ihambisana naleyo kaDobbs et al. (2013), yona ngile elandelayo; uhlelo oluvulekile lokuhwebelana luyisisombululo sanoma yiziphi izihibe ezingaphazamisa ukuthunyelwa kwezimali emhlabeni ukusuka kwelinye izwe ukuya kwelinye. Ukusebenzisana phakathi kohlelo lokuhweba oluvulekile kanye nohlelo lwezokuthuthukiswa kwezinhlelo zezimali kuye kwaba nomthelela ongemuhle kwiFPI, kuwo wonke amamodeli omathathu, ngaphansi kwemiphumela enganqunyelwanga isikhathi, imiphumela enqunyelwe isikhathi kanye nakwihlelo lweFMOLS. Lo mphumela ufana nalowo ka-Al-Smadi’s (2018) othi abatshalizimali bangaphandle bangatshala kalula izimali zabo uma izimakethe zezimali zithuthukile futhi zinemali elingene, ikakhulukazi uma kukhona amazing aphezulu wohlelo oluvulekile lokuhwebelana, okungamazinga ahola uhlelo lwezokuthunyelwa kwezimali ngaphesheya kwemingcele yamazwe (Dobbs et al. 2013). Okuphikisana nalokhu, imodeli 2, ngaphansi kohlelo lwepooled OLS, luye lwakhombisa ukuthi ukuhlanganiswa kohlelo lwezokuthuthukiswa kwezinhlelo zezimali kanye nohlelo oluvulekile lwezokuhwebelana kuye kwaba nomthelela omuhle kakhulu kwiFPI. Lolu lwazi olutholakele luvumelana nombhalo wobuciko, wona oshoyo ukuthi zombili lezi zinhlelo uhlelo oluvulekile kwezohwebo kanye nokuthuthukiswa kwezinhlelo zezimali, ezehlukene kanye nalezo ezizimele ngayinye, ziqinisa uhlelo lweFPI. Ngalokho, okulindelwe, ukuthi umbimbi oluxuba uhlelo oluvulekile lwezokuhwebelana kanye nezinhlelo zokuthuthukiswa kwezimali, ngandlelathize,, ezweni elilodwa, ziholela izinga eliphezulu lokungena kweFPI. Kumodeli 1, uhlelo lweFMOLS, imiphumela enganqunyelwe naleyo enqunyelwe isikhathi iye yabonisa ukuthi amazinga okushintshelana ngezimali abe nmothelela omuhle kakhulu kwiFPI; okuyinto etholakele kuwo wonke amamodeli omathathu angaphansi kohlelo lwe pooled OLS. Lolu lwazi olutholakele luxhasa umbono kaHaider et al’s (2016. Amamodeli Models 1, 2 kanye neye 3 ziye zakhombisa ubudlelwano obuhle kakhulu obuqala ekuthuthukisweni kwezomnotho ngokohlelo lwe FPI, ngaphansi kwesimo semiphumela enqunyelwe isikhathi, ngaphansi kohlelo lwe FMOLS kanye nasohlelweni lwe pooled OLS okuyindlela esetshenziswa ukulinganisa izinga lokuhluma komnotho. Imiphumela efana nayo le iye yatholakala kumodeli 1 kanye nakumodeli 2, ngaphansi kwemiphumela enganqunyelwe sikhathi. Ulwazi olutholakele luveza imibono ka-Al-Smadi (2018) mayelana nobudlelwano obuphakathi kokuhluma komnotho kanye nohlelo lwe FPI. Okuphikisana nalokho, indlela eguquguqukayo iGMM iye yakhombisa ukuthi ukuhluma komnotho kuye kwaba nomthelela omubi kakhulu kwi FPI, uxhasa umbono ka Leong kanye no Wickramanayake (2004) othi, uma kunamazinga aphakeme okukhula komnotho, abatshalizimali basekhaya bathanda ukuthenga amasheya amabhizinisi asekhaya kubatshalizimali bangaphandle, lokho kuba nomthelela omubi kakhulu ekungeneni kwe FPI. Kumodelil 1, umthintela wokongiwa kwezimali ohlelweni lwe FPI watholakala ukuthi ube nomthelela omubi kakhulu, ngaphansi kwesimo semiphumela enqunyelwe isikhathi, kwemiphumela enganqunyelwanga isikhathi, ohlelweni lwe pooled OLS kanye nasezinhlelweni ze FMOLS. Imiphumela efana nayo le iye yatholakala kumodeli 2, ngaphansi kwemiphumela enganqunyelwe kanye naleyo enqunyelwe isikhathi kanye nasohlelweni lwe pooled OLS. Lolu lwazi olutholakele luphikisana nolwazi lombhalo wobuciko okhona (Masood & Mohsin 2002; Abdelhafidh 2013; Ferreira & Laux 2009), kanti futhi le miphumela ifana naleyo ka-Al-Smadi (2018), yena oshoyo ukuthi amazinga aphezulu amandla emali akaqedi kuphela inzuzo yokutshalwa kwezimali, kodwa aqeda nemali yokuqala etshaliwe. Amandla email aye aba nomthelela omubi kakhulu kwi FPI, kumodeli 1 kanye nnakumodeli 2, ngaphansi kohlelo lwe pooled OLS. Ukuthuthukiswa kwamagugu ayikhono nezingqondo zabasebenzi aye aba nomthelela omuhle ohlelweni lwe FPI, kumamodeli 1 kanye nakumodeli 2, ngaphansi mkohlelo lwe pooled OLS kanye nezindlela eziguquguqukayo ze GMM. Lo mphumela uxhasa umbono kaDunning (1988) othi izinzuzo zendawo ziba nomthelela omuhle kakhulu ohlelweni oluqondile lwezokutshalwa kwezimali emazweni angaphandle noma ngiluphi uhlelo lwezokutshalwa kwezimali emazweni angaphandle. Ukuthuthukiswa kwamagugu angamakhono kanye nemibono yabasebenzi kuye kwatholakala kuyinzuzo yendawo ekutshalweni kwezimali emazweni angaphandle kulesi simo, njengoba lokhu kuye kwatholakala kuTsaurai (2017a).