"China will continue to dominate in this category, accounting for 55 billion of total net direct investment flows to emerging markets," the report said.

Europe's emerging economies are likely to receive the biggest share of commercial bank lending in the coming year, however, "accounting for 70 percent of all such lending to emerging markets," the report said.

The report's authors said they generally expected the world's financial markets to remain stable over the next 12 months.

Aside from the ongoing uncertainty surrounding the US housing market, the report said a further weakening of the dollar could also present a risk to its projections.

It said a deeper downturn in the dollar's value would ripple through the economies of the rest of the world and global financial markets.

Worldwide economic growth is expected to be mostly robust in 2007.

"The US economy is envisaged to regain forward momentum relatively early in 2007 commensurate with its potential growth rate of around 3.0 percent," the IIF said.

Growth in Asia is seen exceeding 7.5 percent for the fifth straight year, with China's breakneck economy moderating to "a more sustainable" growth clip of 9.5 percent in 2007.

Emerging Europe's economic growth is projected to decelerate to 5.4 percent in the coming year from a 6.2 percent pace in 2006, the report added.

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