| Portfolio investment is an assemblage of financial investment instruments.These financial instruments are easy to trade and are less perpetual.These instruments are not inevitably an exemplification of long-run interest.As per the theory of International Finance,foreign portfolio investment(FPI)flows are foreseeable consequence of the depositors wanting to finance athwart countries for the sake of diversifying the risk of their portfolio and in order to attain higher returns.FPI is commonly referred considered to be as the bilateral and multiple agreements among nations that bring the cross-border investments.It is also known as an inert investment,this is a kind of investment which mainly related to assets like shares,securities,debentures and others.Foreign portfolio investment(FPI)consists of securities and other capital inflows of assets possibly held by other foreign countries.Foreign Portfolio Investment provides the investor with indirect ownership of financial assets.In emerging economics,a number of factors like GDP growth,CPI,FDI,External Debt and many other play a vital role in attracting stable and smooth foreign investment.This work is intended to explore the impact of FPI determinants(FDI,Population Growth,CPI,Stock market performance,External Debt,Exchange Rate and inflation)on the world most established(Chinese)economy.Furthermore this thesis is divided into 6 chapters and each chapter contains specific aspects of the Foreign Portfolio Investment,through which the reader able to grasp the key points.The structure of the paper is organized as follows:The first chapter is of introduction,which comprehend a detailed introduction of Foreign Portfolio Investment and its determinants.The Second chapter is of literature review,which contains the previous researcher's views and contributions towards the aspect of Foreign Portfolio Investment;initially in this chapter we explained the global perspective related to FPI we further segregate literature from three aspects.One in context of china's FPI and its determinants;than literature review with previous literature on cross country comparison of other countries with reference to FPI and its determinants and finally concluded the chapter with FPI in context to stock market performance.In the Third chapter we provided a detailed theoretical analysis on the general aspect of Foreign Portfolio Investment and then specifically discussed the China's FPI situation.From next chapter onwards we divide our study in to three major portions and each portion consist of a specific understanding.In the fourth chapter we basically discussed both the macro and micro aspects related to China's FPI.Regarding Macro aspects we investigated the FPI and its determinants with reference to China and as far as Micro aspect concerns we focused on the empirical analysis of China's stock market impact on FPI.In which we elaborated in detail the results and empirical analysis,which will be helpful for the investors for making future investment decisions.By keeping in mind the Stock market perspective,the analysis is in detail so instead of a bird's eye view decision makers able to take initiatives.In this chapter we empirically presented and covers the two major portions of our study.In the fifth chapter which is basically the third major portion of our study,in which we provide is a comparisons of FPI determinants of china with other Asian developing economies.In this chapter we also in detail provide the empirical analysis through which investors able to take decisions.To elaborate the first portion of our study we used multiple regression models by using E-views.The data of FPI,GDP,FDI,EXD and P has been taken from the World Bank.GDP and External Debt are the strong determinants of the FPI,the Exchange Rate,Population shows that these variables have a significant impact on the FPI.The investors speculate the high returns,more secure investors' rights and feel safer to invest in the country.In the second portion we focused on the impact of stock market performance on the foreign portfolio investment(FPI)in the case of China.For the purpose,time series data on quarterly basis from 2007Q1 to 2015Q4 is used.On the basis of stationarity results,ARDL model is used to examine the impact of the stock market prices on FPI and the impact of inflation(CPI)on the FPI is also examined.The results showed that there is significant positive impact of stock market performance on the FPI,whereas,inflation is found to negatively associate with the FPI.The study also suggests that there occur some historical events like Asian financial crisis of 2008,and the Shanghai Composite Stock Index crash of 2015,which significantly affected the foreign portfolio investment in China.The importance of FPI becomes even more crucial when the subject country is in its developing phase(which is our third portion of the study),and in the process of exhausting its resources which are not utilized yet.Moreover,do these factors have similar effect on FPI across counties or not.We have used Multiple Linear Regression Models for China,India,Pakistan and Bangladesh,being emerging economies within the same region to examine FPI's determinants.The study found that GDP growth,External Debt,Population growth,and Inflation are the main factors that affect FPI.Moreover,it is also found that there is different relation of similar factor across the countries,which is due the socio-economic,geographic,and geo-political differences among the subject countries.The last chapter contain the conclusion,in which we in-detail elaborate our research work and contribution towards our study.We also explain certain limitations regarding our study due to which we unable to enhance our study but keeping in view our work future researchers will able to extend our study by adding more countries or more variable.We concluded our study by providing suggestions and few recommendations for the future researchers which will be accommodating for them while carrying further research. |
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