Foreign investments up by 50%

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) reported yesterday that foreign direct investments (FDI) yielded a net inflow of $892 million in the first half of the year due to an improvement in equity capital and more reinvested earnings.

BSP officials said that the latest FDI level is almost 50 percent more than the net inflow of $605 million recorded in the same period last year.

The country’s top five investors are the United States, the United Kingdom, Japan, Singapore and Luxembourg, which collectively contributed 81 percent of total funds received.

The FDI, however, posted a net outflow of $133 million in June, mainly on account of inter-company loan repayments to foreign direct investors.

Most of the net inflows during the six-month period were in the form of equity capital amounting to $996 million, the central bank said.

“Gross equity capital placements for the first half of 2009 totaled $1.1 billion, more than twice the year-ago level. This reflected favorable investor sentiment given the emerging outlook on improving global economic conditions. These investments came from the US, Japan, Hong Kong and the Netherlands and were directed mainly to the manufacturing, real estate, construction, services, financial intermediation, mining and trade/commerce sectors,” the BSP said yesterday.

There were also more reinvested earnings for the first half of the year, reaching $88 million, a marked turnaround from the $184-million net outflow posted a year ago.

The BSP said that in the first half of the year, companies performed better than expected, prompting investors to retain part of their earnings in local firms.

Other capital account, consisting mainly of inter-company borrowing and lending between foreign direct investors and their subsidiaries in the Philippines, reversed to a net outflow of $192 million, compared to the $407-million net inflow during the comparable period in 2008. The outflows were attributed to the higher trade credits extended to affiliates abroad and inter-company loan repayments to foreign direct investors.

Meanwhile, foreign investments in stocks, government securities and peso-denominated assets yielded a net inflow of $182 million from January to August, reversing an outflow of $446 million recorded a year ago, due mainly to improving investor sentiment, the BSP also reported yesterday.

“Improving business and consumer confidence brought about by encouraging domestic macroeconomic fundamentals such as declining inflation, easing interest rates and robust remittances by overseas Filipinos, contributed to the upbeat investor sentiment on the Philippines,” the BSP said.

However, transactions for the month of August alone resulted in a net outflow of $83 million from a net inflow of $66 million recorded in July.

The BSP said that during the so-called ghost month, investors “cashed in” on gains from previous market rallies to reposition their portfolio for the month.

Registered foreign portfolio investments of $385 million fell by 26 percent compared to the previous month. About 88 percent of these investments were in Philippine Stock Exchange-listed shares while the balance pertained to peso-denominated government securities.