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December 2010

Countries see hazards in free flow of capital

By Raman Jokhakar
Tarunkumar G. Singhal
Chartered Accountants
Reading Time 1 mins
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30. Countries see hazards in free flow of capital


In China and Taiwan, regulators are imposing fresh
restrictions on stock market investments by foreigners. In Brazil, officials
have twice raised taxes on foreign investors. Even in South Korea, host to this
week’s Group of 20 meeting, pressure is building on the government to take
similar steps.

As the leaders of the 20 major economic powers gather in
Seoul, an increasing number of them have either imposed curbs or are in the
process of doing so to slow the torrent of hot money into their markets.

Short-term investment is now increasingly viewed as something
that needs to be controlled.

Emerging markets have been grappling all year with the
consequences of a flight of investor capital from rock-bottom interest rates in
Western countries in search of higher yields. Short-term capital investment in
emerging markets — largely in stock markets, which are at an all-time high — are
expected to hit $ 458 billion this year, the highest figure since 2007 when $
784 billion flowed into these markets, according to the Institute of
International Finance.

(Source : The Business Standard, dated 12-11-2010)

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