Global funds head to Middle East, Latin America

While foreign capital is flowing out en masse from Asia and Latin America due to the U.S. Federal Reserve Board’s move to reduce quantitative easing, capital inflow into MENA, or Middle East and North Africa, is escalating. Experts cautiously predict that the direction of international capital stream may be shifting.

In an investment report released on Sunday, Deutsche Bank analyzed that about 2 billion U.S. dollars has newly flown into MENA this year. The amount is insignificant given the total volume of international capital transactions, but the bank highlights the shift of direction towards inflow of funds into an area that would see capital outflow.

The MENA regions had seen continued outflow of foreign investment funds due to political uncertainty stemming from Jasmine revolution in 2011. Foreign investors withdrew 192 million dollars of funds from the region during the same period of last year.

International capital tends to move around in search of yields. A significant portion of the funds that have been injected into the market by advanced countries, including the U.S., European Union and Japan, have flown into Asia and Latin America, which has seen relatively higher growth rates, over the past several years. As quantitative easing measures that have continued for nearly five years are gradually making way for exit strategy, international investment capital has started to make move in search of new investment destinations. MENA is emerging as one of such destinations. Of the 2 billion dollars that flew into MENA this year, the amount of foreign capital that newly flew into the region last month came to 655 million dollars. This enables watchers to speculate relations between capital inflow and exit strategy.

Among the MENA countries, Saudi Arabia absorbed the most by garnering 308 million dollars, while Qatar and Dubai attracted 131 million dollars and 129 million dollars, respectively.