- International Monetary Fund
- Published Date:
- August 1996
The Coordinated Portfolio Investment Survey (CPIS) was undertaken in response to recommendations contained in the Report on the Measurement of International Capital Flows (the Godeaux Report), which was published by the International Monetary Fund (IMF or the Fund) in 1992.
According to the report, the 1980s were characterized by tremendous growth in the magnitude of global portfolio investment flows. The expansion of such flows was perceived to be a consequence of the liberalization of financial markets, of financial innovation, and of the changing behavior of investors. The fact that these developments had attracted the attention of policy makers, market participants, and independent researchers was noted in the report.
Among the major findings presented in the Godeaux Report was the existence of serious discrepancies in reported global flows of portfolio investment transactions (especially those in equities and debt securities) and in associated estimates of stock and investment income. Also pointed out in the report was the significant deterioration, apparent in data reported through 1989, in the coverage and quality of data on portfolio investment. (See Table I.1 on page 12.)
|Imbalance (liabilities minus assets)||19.6||59.3||104.7||156.1||66.8||187.9||175.9||280.0|
|Money market instruments||....||–24.3||1.5||–74.6||39.9||44.2||2.8||47.9|
According to the Godeaux Report, the smaller overall discrepancy in long-term portfolio capital transactions concealed more serious problems within the bond and equity components. A larger discrepancy was reported for bond transactions.1 To verify their assessment of flow statistics and to assess the cumulative effect of past mis-measurements of cross-border bond transactions, the parties to the Godeaux Report examined the investment position for cross-border bonds. The result was the identification of a $400 billion discrepancy, existing at end-December 1989, between reported assets and reported liabilities. The size of this discrepancy, which was equivalent to approximately 30 percent of all reported liabilities, was considered consistent with the apparent under-reporting of assets in the portfolio investment flow accounts.
The growth of global discrepancies in reported portfolio investment flows and stocks was attributed, in the Godeaux Report, primarily to three factors: differences in countries’ methods of classifying items within portfolio investment, the difficulty of capturing data on newly emerging financial instruments, and the inherent problems of tracking investment activities engaged in abroad by resident investors and borrowers.
From a statistical viewpoint, these global discrepancies could be interpreted as evidence of the under-reporting of portfolio investment outflows and associated assets, the over-reporting of portfolio investment inflows and associated liabilities, or a mixture of both. Whichever explanation was preferred, prompt resolution of the problems creating the discrepancies was of concern to policymakers who faced increased difficulty in making judgments on the basis of statistics reported for international flows of portfolio investment capital.
A summary of the recommendations that were published in the Report on the Measurement of International Capital Flows is presented on page 9.
In response to these recommendations, the IMF Committee on Balance of Payments Statistics (the Committee) decided in October 1994 to conduct a Coordinated Portfolio Investment Survey. To allow sufficient time for advance preparation, a reference date of end-December 1997 was selected for the CPIS. The Committee’s decision regarding the scope for the CPIS was influenced by the presentation—in the fifth edition of the Balance of Payments Manual (BPM5) published in 1993—of the revised standard components of portfolio investment. (The Godeaux Report was prepared on the basis of standard components presented in the fourth edition of the manual, which was published in 1977.) Therefore, the CPIS encompassed equity and debt securities and—with regard to debt securities—disaggregations by bonds and notes, money market instruments, and financial derivatives. However, as the parties to the Godeaux Report had devoted considerable attention to asset positions in long-term instruments such as equity securities and bonds, the Committee decided to focus on these instruments as well—in part because possibilities for encouraging survey-wide adherence to BPM5 standards for data collection and compilation were greater.
In 1997, the Committee had agreed to changes in the treatment of financial derivatives in balance of payments statistics. In 1998, it was agreed that a separate functional category for financial derivatives would be created and added to the Financial Account. As a result, financial derivatives would no longer be included in portfolio investment. However, portfolio investment data reported to the IMF through 1997 and used in Table I.1 probably include transactions in financial derivatives.
The primary objective for conducting the CPIS was to collect—for use in the compilation or improvement of international investment position (IIP) statistics—comprehensive, geographically detailed information on stocks of cross-border equities and long-term bonds and notes. IIP statistics were, in turn, to be used to check the coverage of portfolio investment flows and associated income transactions recorded in balance of payments accounts. In addition, bilateral data from the survey were—with the assistance of the IMF Statistics Department and to the extent permitted by confidentiality constraints—to be exchanged by participating countries. The exchange of comparable data was intended to enable countries to improve their estimates of nonresident holdings of national portfolio liabilities, as well as their data on associated capital flows and investment income data.
To develop the framework of the survey and to assist compilers with survey implementation at the national level, the Committee formed a task force in October 1994. The task force, which consisted of national experts in the collection of portfolio investment data, produced the Coordinated Portfolio Investment Survey Guide (the Survey Guide) in 1996.
The Survey Guide comprised four chapters and eight appendices. The first chapter presented the purpose, scope, and modalities of the CPIS. The second chapter covered collection methods, potential units to be surveyed, and the degree of detail required. The third chapter dealt with technical issues that a country must address when conducting a survey. (These issues included treatments of different types of securities, methods of geographical attribution, valuation of securities, the distinction between direct investment and portfolio investment, and treatments of transactions that could cause double counting.) The fourth chapter was devoted to practical matters associated with preparing for a national survey. (Practical matters included setting a timetable, taking account of legal and confidentiality issues, developing a mailing list, reviewing and selecting software to be used, and maintaining quality control checks.) The appendices provided three model survey forms: (1) a form for surveying—on a security-by-security basis—custodians and end-investors (banks, security dealers, pension funds, insurance companies, mutual funds, households that keep foreign securities in self custody or invest in foreign securities through nonresident entities); (2) a form for making an aggregate survey of custodians and end-investors; and (3) a form for making an aggregate survey of end-investors. The appendices also contained a short summary of information about the survey, a glossary of terms, flow charts on client/custodial relationships, a listing of the major security databases that national compilers might find useful in their work, and a method for reconciling portfolio investment position data with data on transactions.
Godeaux Report Recommendations for Reporting of Portfolio Investment Data
- When reporting data on portfolio investment transactions to the IMF, countries should make greater efforts to report on a basis consistent with the methodology described in the Balance of Payments Manual (1977).
- Countries should compile geographical details on portfolio investment capital flows and outstanding stocks and exchange these data with partner countries. For this purpose, compilers are urged to allocate transactions in foreign securities on the basis of the debtor-creditor principle—in accordance with which transactions in a country’s external assets and liabilities are allocated, respectively, to the country incurring the liability (the debtor) or to the country owning the claim (the creditor).
- Countries should ensure that portfolio transactions of financial intermediaries and large institutional investors and borrowers are adequately covered by national compilation systems.
- Countries should undertake periodic benchmark surveys of cross-border portfolio claims and liabilities. Resulting benefits would be greatly enhanced if the timing and design of such surveys were coordinated among major countries.
- Authorities in offshore financial centers should be urged to produce balance of payments statistics on the international transactions of those sectors of their economies having significant counterparts in the international accounts of other countries
- Countries engaged in significant amounts of investing should make an effort to conduct a coordinated survey of portfolio investment assets. Survey methodology should be based on that of the Balance of Payments Manual (1977) to ensure the uniformity of data reporting practices. Survey results could serve as a benchmark for addressing gaps in the reporting of portfolio investment outflows. The collection of data on the geographical disaggregation of outstanding stocks of portfolio investment assets would facilitate, for partner countries, the construction of matching data on liabilities. In addition, such data would be of assistance for investigating gaps in national collection systems.
Countries participating in the CPIS were required to report positions in long-term instruments. Mandatory reporting on short-term instruments such as money market instruments and financial derivatives was deferred to a subsequent survey.
All 29 countries that participated in the survey collected certain specific data necessary for the data exchange. Mandatory survey collection requirements pertained to portfolio investment assets and, in particular, to equity securities and long-term debt securities issued by nonresidents and owned by domestic residents. Participants were required to report portfolio investment assets of the aforementioned types on a separate basis and with full geographical detail about the countries of the security issuers. Some non-mandatory data were also compiled by 18 countries; these data pertained mainly to assets in the form of money market instruments (15 countries compiled such data) but also to liabilities in equities, long-term debt, and money market instruments (8 countries compiled such data). Only 2 countries reported data on asset and liability positions in financial derivatives. An overview of CPIS data collected by each participating country is provided in Table I.2. Table I.3 contains detailed information on the specific categories of instruments covered by each country.
|Aggregate||Security by Security|
|Countries||End-investors||Custodians||End-investors||Custodians||Equity||Long-term Debt||Short-term Debt||Financial Derivatives||Equity||Long-term Debt||Short-term Debt||Financial Derivatives|
|1.||Shares and stocks (*)||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•|
|4.||Shares in mutual funds and investment trusts||•||•||•||•||•||•||•||•||•||•||–||•||•||•||8||•||•||•||•||•||•||•||•||•||•||•||•||•|
|Long-term Debt Securities||1||22|
|1.||Non-participating preferred stocks or shares||•||–||–||•||–||•||•||•||–||•||–||•||•||•||–||•||•||•||•||•||16||•||•||•||•||•||•||•|
|2.||Convertible bonds and bonds with optional maturity dates, the latest of which was more than one year after issue||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•||16||•||•||•||•||•||•||•|
|3.||Negotiable certificates of deposit with maturities of more than one year||•||•||•||•||–||•||•||•||•||•||–||•||•||•||10||•||•||•||•||•||•||•||•||–||•||–||•||•|
|4.||Dual currency bonds||•||•||•||•||•||•||•||•||•||•||–||•||•||•||•||•||•||•||•||•||16||•||•||•||•||•||•||•|
|5.||Zero coupon bonds and other deep discount bonds||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•||16||•||•||•||•||•||•||•|
|6.||Floating rate bonds||•||•||•||•||•||•||•||•||•||•||–||•||•||•||•||•||•||•||•||•||16||•||•||•||•||•||•||•|
|8.||Asset-backed securities, such as collateralized mortgage obligations and participation certificates||•||•||•||•||•||•||•||•||•||•||–||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•||•|
|Money Market Instruments||1||23|
|2.||Commercial and finance paper||•||–||•||–||•||–||–||•||–||–||•||–||•||•||•||•||•||–||–||–||•||•||•||•||–||•||–||•|
|4.||Negotiable certificates of deposit with original maturities of one year or less||•||–||•||–||•||–||–||•||•||–||•||–||•||•||10||•||•||–||–||–||•||•||•||–||–||•||–||•|
|5.||Short-term notes issued through note issuance facilities||•||–||•||–||•||–||–||–||•||–||–||–||•||•||•||•||•||–||–||–||–||•||•||•||–||•||–||•|
National compilers were free to use one of several approaches in conducting the survey domestically. The various approaches were discussed in the Survey Guide. The development of a collection strategy required compilers to decide whether to survey: (a) end-investors holding nonresident securities on their own accounts; (b) custodians holding or managing securities on behalf of others; or (c) both end-investors and custodians. The degree of detail requested was generally high for a security-by-security survey in which respondents provided detailed information on their holdings of individual securities issued by nonresidents. Conversely, the degree of detail was generally low for an aggregate survey in which respondents provided aggregate information, disaggregated by counterpart country and denominated in a common currency, on their holdings of securities issued by nonresidents. In principle, all of these approaches (as well as any combinations there of) should have yielded the same results in terms of accuracy and coverage; the cost-effectiveness of any strategy depended on its specific technical features and on the channels through which national saving was allocated to nonresident securities. Table I.2 also provides an overview of data collection strategies.
While representing a major advance in data collection, the CPIS was not exhaustive. Data gathered—as of the reference date of December 1997—from additional sources were used to supplement survey results and are included in the tables in this publication. A Survey of Country Distribution of Long-term Securities Held as Foreign Exchange Reserve Assets (SEFER) was used to collect information, disaggregated by country of issuer, on equity and long-term debt securities held as reserve assets by monetary authorities. Data from a survey of equity and long-term debt securities held by selected international organizations (IO) mainly for the purpose of operating pension funds for staff were also used to supplement CPIS data. Bank for International Settlements (BIS) data, disaggregated by country, on banks’ holdings of nonresident debt securities provided information on four countries (Germany, Switzerland, Luxembourg, and Hong Kong SAR) that did not participate in the CPIS. These additional data were provided to the IMF with the understanding that no individual positions in instruments issued by a specific partner country would be disclosed.
Publication of Survey Results
In this publication of CPIS results, portfolio investment comprises external investment in equity and debt securities other than those included in direct investment and reserve assets. Equity securities cover all instruments and records acknowledging claims, which exist after the claims of all creditors have been met, to the residual values of incorporated enterprises. Debt instruments comprise long-term bonds and notes (with original maturities of more than one year), short-term money market instruments (with original maturities of one year or less), and financial derivatives such as options, warrants, traded financial futures, and currency swaps. These instrument categories are defined in Chapter XIX of the BPM5 and in Appendix V of the Survey Guide.
The remainder of this publication consists of presentations of CPIS results. CPIS data are shown in general tables (section II) and in individual country tables (section III). Survey notes for individual countries appear in section IV.
The general tables (section II) comprise global data matrices showing the portfolio investment assets of participating countries. These matrices pertain, respectively, to portfolio holdings of nonresident equity securities, long-term debt securities, and short-term debt securities. Data were converted in US dollars by using end-1997 exchange rates published in the International Financial Statistics Yearbook. Investing countries are shown by column; some partner countries (those with total portfolio investment liabilities exceeding US$200 million) are reported, by row, individually. Partner countries with total portfolio investment liabilities of less than US$200 million are included as Other (allocated data). Some countries reported small amounts of data that were not allocated by partner country; these data are shown as Countries not allocated. Some countries did not disclose positions with certain of their partner countries for reasons of confidentiality. In such cases, countries reported separately the total amount of confidential data. The total amount of such data is shown as Confidential data.
The individual country tables in section III contain, for the entire list of partner countries, all CPIS data collected at the national level on portfolio investment assets and, whenever data were available, on portfolio investment liabilities. Section III tables also contain geographical details obtained from the additional data sources listed previously. These data are shown as well—in aggregate fashion—in the global matrices of section II. To maximize the amount of geographical detail to be disseminated from the SEFER and IO surveys, data on international organizations and reserves were merged, and data on bonds and equities were combined. Table III.2 presents the portfolio investment totals that were computed on the basis of all data reported to the IMF. (These totals do not include values not disclosed by national compilers for reasons of confidentiality.)
Information for the survey notes of individual countries (section IV) was gathered through a questionnaire sent by the IMF to all national compilers of countries participating in the CPIS. These notes describe the essential features of survey implementation in each participating country. In addition, the notes contain national compilers’ explicit assessments of the quality and coverage of survey data collected in their countries.
The following symbols are used throughout the tables in this publication.
The dash (–) indicates that a figure is zero.
Two dots (..) indicate that a figure is less than half of a significant digit.
Four dots (....) indicate a lack of reportable statistical data.
The letter (d) indicates that a non-zero datum was available to the national complier but not disclosed to the IMF for reasons of confidentiality.
Table I.1 shows that the rapid expansion in portfolio investment flows continued through the 1990s and that global discrepancies in long-term portfolio investment simultaneously increased. Partly because the BPM5 contained a recommendation to classify money market instruments as portfolio investment, the coverage of these instruments improved in the mid-1990s. However, a pattern of under-reporting portfolio investment outflows and/or over-reporting portfolio investment inflows in money market instruments remained apparent.
Data on money market instruments are shown in Table I.1, and data on transactions in financial derivatives are included within the data in the table. There is no disaggregation of data on financial derivatives because only a few countries reported such data, and information on global discrepancies would not, therefore, be meaningful.
For regular assessments of global discrepancies in the current and financial accounts, see the 1994–1998 annual reports of the IMF Balance of Payments Statistics Committee.
|(1)||Data collected by Argentina pertain mainly to shares, depository receipts, treasury bonds, treasury bills and negotiable CDs.|
|(2)||Conformance with the definition contained in the BPM5 was required for these securities to receive coverage.|
|(3)||Participations are included in direct investment.|
|(4)||Conformance with the definition contained in the BPM5 was required for these securities to receive coverage.|
|(5)||Installment receipts and preferred stocks or shares (The distinction between participating and non-participating instruments was rarely made because that information was usually unavailable.)|
|(6)||Negotiable certificates of deposit with maturities of more than one year (Information on maturity dates was often missing.)|
|(7)||Fixed-rate bonds, any bond not previously described, and medium-term notes|
|(8)||Excluding open-ended, nonincorporated investment trusts|
|(11)||Open-ended, nonincorporated investment trusts|
|(12)||Total premiums (including estimates) paid/received on options not yet exercised and holdings of warrants|
|(13)||Equity securities sold through repurchase agreements and equity securities lent through securities lending arrangements|
|(14)||Debt securities sold through repurchase agreements and debt securities lent through securities lending arrangements|
|(16)||Long-term securities were generally reponed as bonds. Bonds might include other types of long-term debt securities, such as those referred to in notes 1, 2, 4, 5, 6, and 7. Additional details are available for public and guaranteed bonds.|
|(17)||Data for a residual other category were reported. Other might include other types of short-term debt securities, such as those referred to in notes 3 and 5.|
|(18)||All quoted equity securities|
|(19)||All quoted long-term debt securities|
|(20)||All quoted short-term debt securities|
|(21)||Not explicitly mentioned in the survey form|
|(22)||Through aggregate reporting, the UK provided data for all categories except negotiable CDs with maturities of more than one year. Data for bonds With maturities of less than one year were included. (Institutions were asked to report all bonds—regardless of maturities—as debt securities because of the implementation of ESA95.)|
When the Godeaux Report was being prepared in 1992, transactions in short-term debt securities were not classified in portfolio investment. In addition, only a few countries reported separate data for these transactions. Therefore, it was difficult for parties to the Godeaux Report to draw firm conclusions from a study of global discrepancies.