Inward and outward direct investment stocks remained sizeable last year, each twice the size of the GDP, highlighting Hong Kong's role as an international finance centre.

According to Census & Statistics Department figures released today, last year saw a decline in inward direct investment by 19.9% from a year earlier, to $2.62 trillion. Its ratio to GDP stood at 208%.

Outward direct investment dropped by 12% to $2.42 trillion, which represented 192% of the GDP last year.

The decline was primarily due to the negative valuation effect arising from a decline in equity prices both locally and in overseas markets.

Economic, geopolitical reasons trigger decline

Prices in most of the major stockmarkets around the globe had significant double-digit decreases last year, amid the weak external economic environment and looming geopolitical uncertainty in the Middle East at that time.

The Mainland continued to feature highly both as a place for Hong Kong's direct investment, accounting for 22.6% of the total inward direct investments and 34.9% of total outward direct investments.

This has proved Hong Kong's status as an important foothold and conduit for conducting business between the Mainland and the rest of the world.

With the implementation of CEPA early next year, that role will be enhanced.

British Virgin Islands largest investor

The British Virgin Islands was the place with the largest share of both inward and outward direct investment, at 29.7% and 47.5% of the total stocks.

The year also recorded a sharp fall in direct investment inflow from $185.4 billion in 2001 to $99.8 billion last year.

This was mainly due to a negative direct investment inflow of about $80 billion from the Cayman Islands and the US in the year, upon repayment of debts by some resident enterprises to their parent and related companies there.

Direct investment outflow rose from $88.5 billion in 2001 to $137.5 billion last year, with the Mainland accounting for $121.9 billion.