Morning Market Brief: June 19, 2024

US attracts one-third of foreign investment

Investment fund flows into the US have climbed from prior to the pandemic. According to the International Monetary Fund (IMF), the US attracted roughly 18% of foreign direct investment (FDI) before COVID-19. On the other hand, FDI into China has trended down. 

• IMF reveals the US is attracting more FDI. The percentage of global investment making its way into the US has risen to one-third since the pandemic.
• Foreign investments in China decline. Conversely, the volume of international investments heading to China declined from around 7% pre-pandemic to 3% in 2024.
• Higher interest rates attract global investors. Government bonds became more attractive as a low-risk asset class after a series of fast-paced interest-rate hikes.
• US government energy incentives also helped to pull in FDI. Initiatives under President Joe Biden that focused on the semiconductor and renewable energy segments have been appealing.
• Chinese policymakers are looking at boosting investment interest in China. Still, historically low interest rates provide a backdrop for Chinese capital to move out of the country.
• Other emerging markets such as Mexico and India are on the radar for investors. In 2023, FDI accounted for about 1.5% of gross domestic product in emerging markets.

The IMF estimates that, overall, more capital left emerging markets than entered over the past few years, which hasn’t happened since 2000. The US has been taking a lot of the FDI spotlight, and the forecast for just one rate cut this year by the US Federal Reserve Board presents a backdrop that could impact the flow of global investments.

At CIBC Private Wealth, we aim to take a comprehensive approach to managing, building and protecting your wealth. If you'd like to discuss this market and economic update in more detail, please get in touch with your advisor any time.