The balance of payments roared into positive territory in the final quarter of last year, powered by stronger exports of services and inflows of investment funds. The robustness of the recovery has been known for some time, but the Government provided a detailed breakdown of the capital and financial accounts for the first time yesterday. This fills gaps in the economic statistics and provides a sharper picture of the recovery process. 'We now have the background to what happened in the economy,' said Ian Perkin, chief economist at the General Chamber of Commerce. 'There was a tremendous overseas impetus to this [recovery], not just the external-trade figures but also Hong Kong's attractiveness as a place to invest.' The overall balance of payments surplus swelled to HK$74.1 billion last year, equivalent to 6 per cent of gross domestic product - a turnaround from 1998, when the balance of payments was in deficit by HK$53.8 billion, equivalent to 4.2 per cent of GDP. Nearly three-quarters of last year's surplus, or HK$52.1 billion, was generated in the final quarter, when the surplus in services trade widened sharply and direct, portfolio and financial-derivative investments flooded into the SAR. Perhaps the clearest evidence of the strong investment inflows can be seen in the stock market's performance: the benchmark Hang Seng Index surged 32 per cent in the fourth quarter. 'Through the East Asian financial crisis, we had people withdrawing funds from Hong Kong, particularly through 1998,' Mr Perkin said. 'Now, in 1999 you see the mirror image of that, the complete turnaround. You see people putting investments back into Hong Kong.' Inflows of direct and portfolio investment and financial derivatives came to HK$370.6 billion last year and HK$186.1 billion in the fourth quarter. 'If we didn't get this sort of portfolio and direct-investment inflow, our economy would not have performed the way it did,' Mr Perkin said. The economy grew 3 per cent in inflation-adjusted terms over the course of the year, and by 9.2 per cent in the fourth quarter. But important as these particular types of capital inflows were, the capital and financial accounts overall remained in deficit, showing net outflows of HK$76.2 billion last year. Far and away the biggest contributor to the balance of payments surplus last year was rebounding trade in goods and services. The current account, which tracks trade in 'visible' goods and 'invisible' services, posted a surplus of HK$72 billion. That was a dramatic improvement from 1998, when the surplus was just HK$22.5 billion. The visible-trade deficit shrank significantly, thanks to stronger exports as the regional and global economic environment improved, and to slacker retained imports as domestic demand remained modest. The invisible-trade surplus surged for the same reasons. Transportation and other services, including insurance, financial and trade-related services, posted the biggest surpluses. Travel services recorded a net deficit of HK$49.2 billion, reflecting the increasingly globe-trotting character of the Hong Kong population.