Non-resident investments are divided into direct and portfolio. Direct investments involve participation in management and have a long-term nature, while portfolio investments involve the acquisition of securities without the aim of control. Portfolio funds are more mobile and respond more quickly to changes in conditions.
For the market, an inflow of such investments means increased liquidity and an expanded range of buyers during placements. The downside is increased dependence on external factors: changes in rates on world markets or a shift in attitudes towards the region can cause an outflow regardless of the situation with specific issuers.
A foreign investor assumes additional currency risk: even if the price of a security rises in the national currency, the result in their own currency depends on the exchange rate. Therefore, the return required by non-residents is usually higher than that of domestic investors.
Practical significance for a private individual is indirect. The access conditions for non-residents, the conversion and repatriation regime of income affect the overall assessment of the market, and thus the prices of instruments owned by that individual.