Abstract
This study investigates the relative importance of “pull” and “push” factors in determining portfolio investment flows to Asian and Latin American economies. The market's attitude toward risk is included as a “push” factor. The study finds that factors that pull and push foreign portfolio investment (PI) differ between Asian and Latin American economies. PI in Asia was dominantly pushed by investors’ appetite for risk and other external factors while favorable domestic economic conditions had a negligible role in attracting portfolio investors. On the other hand, PI in Latin American economies was somewhat pulled by strong economic growth, and also pushed by foreign financial factors but not by the market's risk appetite. Based on these findings, the study concludes that PI to Asia is “hot” money since it is vulnerable to swings of global market mood and external factors, and thus can be unstable, volatile and speculative.
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