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GLOBAL TRENDS

Annual Analysis of U.N. Report on Global Direct Investments  in 2001

Global Investments Plummet

…in Aftermath of 9/11, But There Are Some Bright Spots

PHOENIX, Jan 23 - In its first report on direct foreign investments for a post-9/11 period, the Geneva-based United Nations Conference on Trade and Development (UNCTAD) provided ample evidence of a global plunge in multinationals’ business spending.

In the aftermath of the Sep 11 attacks, global investments plummeted by 51%.  The business spending in the U.S. and the E.U. (European Union) plunged by 59% and 60% respectively in 2001, according to the UNCTAD 2002 “World Investment Report.”  Spending in the developing world also declined, but much more modestly (down 14% in 2001).

The cross-border M&As (mergers and acquisitions), the main drivers of the foreign investment explosion in the post-Cold War era ($6.1 trillion since 1989), dropped by 48% in 2001. 

Even in their relative demise, however, the M&A’s gained in prominence as drivers of foreign investment activities.  Their share of direct global investments went form 77% in 2000 to 81% in 2001 (also see “Cross-border M&As Rule the World”, Feb 2001).

But not everything was gloom and doom in the latest UNCTAD report.  There were some bright spots on the global investments map.  Just as we suggested in the immediate aftermath of the 9/11 attacks, what had happened was the End of Folly, Not of World (Sep 2001).  Multinational companies willing to engage in worldwide “stalk and sharp-shoot” contests, rather than “herd and shot-gun” fairs, will fare better.  They will still find the post 9/11 world a target-rich area.

[snip]

Our report then goes on to describe in detail the investment performance of various world regions and the opportunities in the future:

Some Bright Spots

As you can see from the chart, while the developed countries led by the U.S. and the E.U. fell like lemmings off the proverbial cliff in 2001, foreign investments in Mexico, for example, surged by 68%.  Investment activities in India and Hungary were up by 47%.  The Red China, the “Real Cold War Winner,” the developing world’s most popular investment destination, attracted 15% more capital in 2001 than the year before.

[snip]

Regional Analysis

Developed countries weren’t the only losers in 2001.  Investments in Argentina, for example, the Latin American country that bankers and multinational companies showered with money only two years earlier ($24 billion in 1999), dropped by 71% in 2001 to only $3.2 billion.  And the foreign money all but dried out in 2002, as the Argentine financial crisis caused street riots and looting in Buenos Aires.

[snip]

Summary

In our first report after the 9/11 attacks, we opined that what happened was the End of Folly, Not of World:

When the New York stockmarket reopened on Sep. 17 (2001)… the Dow dropped 7% and the airline stocks plummeted about 40%.  To some investors, it seemed as if the end of the world had come.  It did not.  The universe was unfolding as it always has been.  What goes up must come down.  The end of folly, not of the world, was merely taking place… A cashflow-driven market, which is what we’ve been saying for years the Wall Street casino has become, simply shifted its assets away from some U.S. equities into other investment opportunities. 

Annex Bulletin 2001-18 (Sep 26, 2001)

The latest UN report on global investments confirmed our initial assessment.  There are still plenty of opportunities left in the world for patient sharp-shooters.  But the era of shot-gunning the world markets seems to be over.  That’s good news for bargain hunters; bad news for sheep among global investors.

"That's all she wrote," we're afraid, for those of you who are NOT Annex Research clients, and who are now reading the complete Annex Bulletin (12 pages in print edition), along with all charts which back up our story.

Qualified media and friends of Annex may request a TEMPORARY User ID and Password by clicking here and explaining why they wish to have access to this particular Annex Bulletin.  Or call Bob Djurdjevic at 602-481-7733 (cell) to promise not to copy it or otherwise republish it.

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Happy bargain hunting!

Bob Djurdjevic

Also, check out some of our other reports on global investments and trends:

China: Real Cold War Winner (Mar 2002), Robber Baron Era Is Back (Feb 2001), End of Folly, Not of World (Sep 2001), A Cleaner, Neater World? Hardly. Deadlier, for Sure (Feb 2000), Death of The Corporation (July 1999), Two Faces of Globalism; Yin and Yang; Princes and Paupers (Dec 1998), The Great Asian Bailout (Oct 1997), Russia Is Still the Bogey (Oct 1997).

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Volume XIX, No. 2003-02
January 23, 2003

Editor: Bob Djurdjevic
Published by Annex Research
e-mail: annex@djurdjevic.com

P.O. Box 97100, Phoenix, Arizona 85060-7100
TEL/FAX: (602) 824-8111

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