angle-left null Capital Inflow Bonanzas: An Update on an Old Theme

Capital Inflow Bonanzas: An Update on an Old Theme

White Paper Macro & Market Active Fixed Income
May 2018
Capital Inflow Bonanzas: An Update on an Old Theme

Authors and Contributors

Stop me if this sounds familiar: Global investors turn with interest toward some “foreign” market. Capital flows in volume into the “hot” financial market. The exchange rate tends to appreciate, asset prices rally, and local commodity prices boom. These favorable asset price movements improve national fiscal indicators, allowing authorities to slack off reform efforts, and encourage domestic credit expansion. This, in turn, exacerbates structural weaknesses in the domestic banking sector, even as global entities seeking entry into the now “exclusive” club court local institutions. But tides also go out when investor fancy shifts and the “new paradigm” looks shopworn. Flows reverse and asset prices give back their gains, often forcing a painful adjustment in the economy.

On January 31, 2018, The Boston Company and Standish merged into Mellon Capital to form a combined entity, BNY Mellon Asset Management North America Corporation. Effective January 2, 2019, this entity was renamed Mellon Investments Corporation.