In a report on prospects for global emerging markets in 1999, the bank said flows of foreign direct investment (FDI) to Asia had remained relatively stable in Malaysia and Philippines, while South Korea and Thailand enjoyed a significant inflow of cash.

``There was some pick up,'' Ashoka Mody, leading specialist (international finance) at the bank, told a press conference in Hong Kong. ``As exchange rates depreciated and asset prices fell there was new investment in Thailand and Korea which helped to offset the decline in capital flows,'' he said.The stability of FDI flows compares with a more than 50 per cent plunge in foreign portfolio investment to $8 billion in 1998.

The bank said the increase in Thailand and South Korea was mainly due to a surge in mergers and acquisitions, with foreign investorsattracted by a sharp depreciation in asset values post-crisis. Government efforts to restructure the battered economies and deregulate the markets also helped attract cash, the bank said. ``The two countries have significantly improved the policy and institutional environment for financial and corporate restructuring,'' the report said.

In Thailand, the majority of merger and acquisition activity centred on the heavily indebted banking and finance sectors, which the government has been aggressively moving to reform. Deals in which the foreign party acquired a majority interest totalled $1.8 billion in the sector, compared with total merger and acquisition activity of $2.6 billion.

In South Korea, most of the activity was in manufacturing accounting for $6.2 billion out of total deals worth some 7.7 billion. Mergers and acquisitions in Malaysia and Philippines also showed signs of improvement in the second half of the year, but still remain limited, the bank said.

Political uncertainty in Indonesia hadbrought activity to a standstill, with total FDI inflows of just $1.3 billion in 1998 compared with $4.7 billion in 1997.