Repeats Thursday's column with no changes to text

By Jamie McGeever

ORLANDO, Florida, Feb 27 (Reuters) - If Donald Trump's second presidency truly signals the end of the postwar U.S.-led, international order, cross-border investment flows could change dramatically, as inward-looking investors may start keeping more of their capital at home.

Replacing multilateral institutions, international accords and established norms with unilateralism, protectionism and defined spheres of influence could lead to greater geopolitical tensions, reduced immigration, a move toward national industrial policy and a more unpredictable business environment.

As Apollo Global Management's Torsten Slok puts it, we could be moving from "globalization to segmentation", which could lead to increased 'home bias' among investors.

Given the enormous scale of current cross-border flows between leading economic powers, such a shift could have huge impacts on asset prices – especially in the United States.

U.S. EXCEPTIONALISM

Remarkable as it might seem, the U.S. was once a net exporter of capital. Its net international investment position (NIIP) was positive until 1989.

But a lot has changed in the past four decades.

In September last year, America's negative NIIP expanded to a record $23.6 trillion. That's the result of decades of foreign investors pouring more capital into U.S. stocks, bonds and businesses to gain exposure to the world's most dynamic markets than U.S. investors channeled overseas.

What's even more remarkable is how much of this spike has occurred recently. The U.S. NIIP imbalance increased by $5 trillion in the space of just 12 months through September, as the nominal value of overseas claims on U.S. assets rose to a whopping $10 trillion, outweighing the $5 trillion jump in U.S. claims on the rest of the world.

Meanwhile, even though total cross-border inflows as a share of world GDP shrank in 2022-23 from 2017-19, America's share of that pie nearly doubled to 41% from 23%, according to the IMF.

PEAK GLOBALIZATION

Enormous as these cross-border flows may be, what we've seen in recent years is not so much increased globalization in investment flows as increased concentration – with everyone putting their eggs in the U.S. basket.

The era of peak globalization - and peak growth in cross-border flows - was actually in the 1990s and 2000s before the Global Financial Crisis. Annual non-resident capital flows into emerging markets rose roughly seven-fold in the 1990s, and again between 1999 and 2007, Institute of International Finance figures show.

This explosion in cross-border flows was fueled, in no particular order, by deregulation, reduced trade and investment barriers, increased immigration, China's economic rise, the launch of the euro, technology advancements, the collapse of the Soviet Union, and Russia joining what became the "G8" group of nations.

While some parts of this global edifice have turned to dust and others are crumbling, much of the structure remains intact. So a return to the pre-globalized world of the 1980s and beyond is highly unlikely. But equally, the concentration of investor flows into the United States is unlikely to persist in a world of increased segmentation.

RETRENCHMENT

If Apollo's Slok is correct that such segmentation will lead to a rise in home bias among investors, Wall Street, a major beneficiary of international capital flows in recent years, could be exposed.

The opposite could be true for Japan, whose NIIP is a positive $3.3 trillion, reflecting the $10 trillion of assets held abroad by Japanese households, investors and businesses.

Of course, Japanese 'repatriation' has long been the sword of Damocles hanging over yen-funded carry trades. While it has fallen briefly during periods of crisis, the pain has never lasted long.

But in a more segmented world, might we see, if not frenzied capital shifts, a gradual, steady, prolonged flow of Japanese money back home? It's certainly possible.

Over in the euro zone, the NIIP is fairly balanced, but the bloc's residents' gross claims on the rest of the world are still enormous at some $39 trillion. If European investors start to pull even a fraction of this home, it could have major impacts on the euro and local assets.

While it's impossible to say definitively that a paradigm shift is occurring, recent economic and geopolitical trends indicate the future might be more fractured, meaning non-U.S. investors could become more parochial and less enamored of Wall Street.

(The opinions expressed here are those of the author, a columnist for Reuters.)

(By Jamie McGeever; Editing by Kirsten Donovan)

((jamie.mcgeever@thomsonreuters.com; Reuters Messaging: jamie.mcgeever.reuters.com@reuters.net/))