The ADB suggests that confidence in the ability of countries to sustain growth over the long term has not fully recovered and that investors prefer to keep liquid positions rather than putting their money into hard investments.
Better functioning capital markets could assist a recovery and expand in the process. “Fundamental [to a pick-up in investment] will be the ability of financial systems to direct resources to the best projects. This will not only require continuing improvements in banking regulation and supervision, but also the expansion of capital markets that price risks efficiently, improve information flows and enhance liquidity,” says the report.
