4 Comments
User's avatar
dede's avatar

>The biggest driver for this increase is not increased buying of US equities by foreigners. Instead it has been market outperformance of the US stock market relative to foreign stock markets. This drives up US liabilities to foreigners who hold US stocks.

This assumes that average holding period of foreign equity holders is much longer than the market average. There is no evidence to suggest this is true, implying 50% of the increase in foreign equity is due to inflows.

Expand full comment
Meyrick Chapman's avatar

For a different approach, look at p.8 (table 3) at this link: https://ticdata.treasury.gov/resource-center/data-chart-center/tic/Documents/shla2023r.pdf

The numbers are different for compositional reasons but the trend is the same.

Expand full comment
Meyrick Chapman's avatar

You are right there has been buying over the long-term (nearly 20 years) but most of that was concentrated pre-2011.

End 2006 foreign holdings amounted to 14% of US equities

End 2011 foreign holdings amounted to 25% of US equities.

End Q3 2024 foreign holdings amounted to 30% of US equities.

So, since 2011 the main effect of increased value of foreign liabilities has come from valuation effects, not from new purchases.

Figures taken from BEA & World Bank + my calculations for latest market cap.

Expand full comment
Meyrick Chapman's avatar

That could be true, though the foreign holdings as % of total market capitalization have not changed very much so if inflows have been happening it has been churn.

Expand full comment