China the global favourite for outside investors

Further proof of the rising dominance of the BRIC economies came this week in the UN’s World Investment Prospects Survey which forecast India and Brazil will overtake the US as the destination of choice for foreign direct investment (FDI) flows by 2012.

The survey, which quizzed global business executives on their international investment strategies, placed China firmly at the top of the list of preferred investment regions followed by India, Brazil, the US and Russia – the first time all four major emerging markets have ranked in the top five.

According to the survey, the manner in which each country handled its economy in the aftermath of the global financial crisis has partly shaped FDI prospects. As developing regions showed more resilience to the crisis than developed economies, inflows into developing regions are predicted to be greater. In addition, as global companies increasingly look for growth opportunities outside their more sluggish home markets the BRIC economies stand to benefit from further inflows.

Mexico was also riding high in the list, in sixth position. It seems that the sound fiscal and monetary policies made after the 1994 financial crash have made the country better able to endure global shocks and, ultimately, more investable.

CIVETS, the acronym coined by HSBC to group together some of the new bright prospects in emerging markets - Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa - fared less well. Just three of the countries - Vietnam (in eighth), Indonesia  (in ninth) and South Africa (in nineteenth) - made the top twenty investment destinations.

In terms of industry and growth prospects the survey predicts that service industries such as telecommunications, utilities and consumer services which again were less affected by the crisis, will continue to see robust growth as they are less sensitive to business cycles than the industries such as manufacturing which can be feel the effects of market swings more greatly.

The survey estimates the level of FDI inflows in 2011 to reach a range of $1.3 - $1.5 trillion, rising in 2012 to between $1.6 and $2 trillion.

Further reading: investing in BRICs

The great funds of China

Emerging Markets: three funds for risky Russia

Three great ways to invest in the emerging power of India