PH foreign direct investments down 43% in April

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PH foreign direct investments down 43% in April
April results show a $289 million (P13 billion) drop mainly felt in net placements in debt instruments

MANILA, Philippines – Foreign direct investments (FDIs) posted net inflows of $382 million (P17.2 billion) in April, the Bangko Sentral ng Pilipinas (BSP) reported on Friday, July 10.

FDI, which is a key source of jobs and business financing, is down 43% in April from the $671 million (P30.2 billion) recorded a year ago. This is mainly due to the decline in non-residents’ net placements in debt instruments. 

Net placement in debt is where an investment bank places the new bond issue with a small number of buyers, typically large institutions.

While the BSP data showed that all FDI components remained in positive territory during the month, this continues the string of lower FDI results observed so far this year relative to last. 

The foreign pullback has been driven partly by investor concerns that the US Federal Reserve would raise interest rates at the end of the year, said Bank of the Philippine Islands (BPI) Securities Corporation CEO Mike Oyson at the 2015 BPI Trade Pinoy Millionaryo Conference held on June 20.

The concern is that such rate hike would trigger massive foreign portfolio outflows from emerging markets as foreign funds search for higher yields, he explained.

April results

Net placements by non-residents in debt instruments issued by their local affiliates reached $276 million (P12.4 billion) in April, lower by 52.5% relative to the level posted in April 2014.  

This drop was slightly offset by net equity capital investments reaching $25 million (P1.1 billion), a 120.8% increase from $11 million (P496.3 million) recorded also in April 2014 – as placements of $39 million (P1.7 billion) exceeded withdrawals of $14 million (P631.2 million) during the month. 

Equity capital placements emanated largely from the United States, the United Kingdom, Hong Kong, Germany, and Luxembourg and were channeled mainly to real estate, manufacturing, administrative and support service, financial and insurance, and wholesale and retail trade activities. 

Similarly, reinvestment of earnings amounted to $81 million (P3.6 billion), up by 3.4% from $78 million (P3.5 billion) recorded a year ago. 

The year so far

On a year-to-date basis, FDI flows for the January-April 2015 period likewise remained positive at $1.2 billion (P54.1 billion), a 48.3% decline relative to $2.4 billion (P108.2 billion) recorded a year ago. 

By FDI component, net equity capital investments reached $279 million (P12.5 billion) with placements of $369 million (P16.6 billion) relative to withdrawals of $90 million (P4 billlion) during the period. 

Equity capital placements during the first 4 months of the year were sourced mainly from the US, Japan, Singapore, the United Kingdom, and Spain.

These were channeled primarily to manufacturing, real estate, electricity, gas, steam and air conditioning supply, financial and insurance, and wholesale and retail trade activities. 

Reinvestment of earnings amounted to $266 million (P11.9 billion), lower by 20.4% from the $334 million (P15 billion) posted in the same period last year. 

Meanwhile, non-residents’ net investments in debt instruments reached $688 million (P30.1 billion) in the first 4 months of 2015.  –

US$1 = P45.09

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