Oct. ’13 foreign investments hit $254M, up 66%

Foreign investors flocked to the Philippines last October even as attention shifted from emerging markets to traditional safe havens like the United States and Europe, which have started to show stronger signs of recovery.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that foreign direct investments (FDI) rose by nearly two thirds in October last year amid the rosy outlook for the country.

“The notable rise in foreign investments into the country reflects favorable investor sentiment on the back of the country’s macroeconomic stability amid challenging global economic conditions,” the BSP said in a statement.

For October, the country received a net inflow of $254 million in FDI, 65.9 percent more than the level seen in the same month in 2012.

As a result, total investments from the start of the year reached $3.4 billion, higher by more than a third from the same 10-month period the previous year.

This is higher than the BSP’s forecast for FDI in 2013 of $2.1 billion.

FDI enter the country in the form of new companies entering the Philippines or foreign firms pouring in more cash either in the form of debt or equity to expand their existing operations.

Profits of multinationals in the Philippines that are spent for the expansion of their local operations are also counted as foreign investments.

Unlike foreign portfolio investments or “hot money,” foreign direct investments are considered a more desirable form of investment since the establishment or expansion of foreign companies in the Philippines leads to more jobs.

Direct investments are also riskier for investors.

Whereas investments in financial instruments such as bonds and stocks can easily be liquidated when valuations turn sour, direct investments tie investors down for extended periods of time.

The BSP said more than half of the direct investments in October were in the form of loans from multinationals to their affiliates or subsidiaries in the Philippines.

These debt placements reached $135 million or more than half of the total for the month.

Equity capital, or investments by multinationals in the form of equity, reached a net inflow of $68 million as placements of $115 million more than offset $47 million in withdrawals.

Most of the money was invested in the manufacturing, financial, real estate, and mining industries.

The biggest sources of equity investments were companies based in the United States, Singapore, Switzerland, Hong Kong and Taiwan.