Foreign direct investments surge 123.4% in Sept

MANILA, Philippines – The amount of foreign direct investments (FDIs) flowing into the Philippines hit a new record high in September, the Bangko Sentral ng Pilipinas (BSP) reported Friday, December 11.
 
BSP Governor Amando Tetangco Jr said FDIs, a key source of jobs and business financing, jumped 123.4% to $1.52 billion in September from $680 million in the same month last year on the back of the country’s sustained gross domestic product (GDP) growth, benign inflation environment, healthy foreign exchange reserves, and stable foreign exchange rate.
 
The country’s GDP growth accelerated to 6% in the third quarter of 2015 from the revised 5.8% in the second quarter amid robust domestic demand and improving government spending.

GDP expansion in the first 9 months of 2015 is now 5.6%, way below the 7% to 8% target penned by economic managers for this year.
 
On the other hand, inflation kicked up to 1.1% in November from a record low of 0.4% in October due to a sharp increase in food prices. Inflation averaged 1.4% in the first 11 months of the year, below the 2% to 4% target set by the BSP.
 
Equity placements

Tetangco traced the record FDI inflows in September to the sharp increase in equity placements.
 
“This developed as a result of the notable increase in non-residents’ investments in equity capital and debt instruments issued by their local subsidiaries or affiliates,” he added.
 
On December 10, the BSP reported equity placements surged 546.1% to $1.15 billion in September this year from $178 million in the same period last year while withdrawals soared 3,087% to $789 million from $17 million.
 
The BSP chief said bulk of equity capital placements came from the United Kingdom, the Netherlands, Japan, US, and Germany.
 
Equity capital investments were channeled mainly to manufacturing; financial and insurance; construction; wholesale and retail trade; and real estate activities.
 
Earnings of foreign companies operating in the Philippines that were plowed back into the country declined by 17.1% to $51 million in September this year from $61 million in the same month in 2014.
 
Intercompany borrowings

But intercompany borrowings from foreign direct investors by their subsidiaries or affiliates in the country helped offset the sharp drop in equity placements and higher withdrawals in September.
 
Non-residents’ net investments in debt instruments, including net intercompany borrowings particularly in the transportation and storage, as well as construction industries jumped 89.7% to $869 million from $458 million.

For the first 9 months, data showed FDIs recording a net inflow of $4.54 billion or 5.5% lower compared to $4.8 billion in the same period last year.

Equity capital investments reached $1.4 billion on account of the 38.1% increase in gross placements to $2.2 billion, exceeding withdrawals to $789 million.

Hot money

More foreign portfolio investments or “hot money,” meanwhile, were pulled out from the Philippines in November due to uncertainties brought about by the impending interest rate lift-off in the US this month, as well as weak corporate earnings.
 
The BSP said on Thursday that the Philippines booked a net outflow of foreign portfolio investments of $68.79 million in November following a net inflow of $27.84 million in October.
 
Foreign portfolio investments are also known as “hot money” since these are speculative capital flows that move very quickly in and out of markets.

November’s net outflow was a complete reversal of the net inflow of $369.92 million in November 2014.
 
Inflows also fell 39.4% to $1.08 billion in November from $1.79 billion in the same month last year, while outflows also declined by 19% to $1.15 billion from $1.42 billion. – Rappler.com