PH still attracting FDIs, says Nomura

Japanese investment house Nomura expects the Philippines to remain a magnet for foreign direct investments (FDIs), dispelling recent concerns about a downturn.

In a research note “Philippines: Dispelling some FDI fears” dated Oct. 12, Nomura economists Euben Paracuelles and Lavanya Venkateswaran said “the uptrend remains clearly intact.”

The research sought to allay jitters amid reports that the equity capital component of FDIs to the Philippines fell by 90.3 percent year-on-year in the first half.

“We think this represents only part of the FDI picture and thus may be misleading,” Nomura said, noting that overall FDI inflows fell by a much smaller 14 percent year-on-year in the first half.

Nomura also pointed out that year-on-year FDI data had been distorted by a large base effect from the foreign purchase of a large stake in a local bank last year, which led to a surge in inflows of about $2 billion in April 2016.

Nomura was referring to a landmark banking deal in the first half of 2016 when Security Bank took in Japanese banking giant Bank of Tokyo-Mitsubishi UFJ as a strategic partner with a 20-percent stake, resulting in a fresh capital infusion of P36.9 billion.

After stripping out this base effect, Nomura estimated that total FDI inflows went up by about 65 percent year-on-year in the first half of 2017.

“Given the chunky nature of FDIs, we prefer to gauge underlying trends by looking at FDI levels on a 12-month rolling sum basis, which are still clearly showing a pickup despite the political transition,” Nomura said.

The research also pointed to the latest report from the Bangko Sentral ng Pilipinas showing that, for July, equity capital rose sharply to $131 million from the monthly average of $23 million in the first half.

Nomura said FDIs would likely pick up further in the near term due to two large impending corporate acquisitions. It was referring to the buy-in deal by a consortium that includes Singapore’s sovereign wealth fund GIC and Macquarie in geothermal energy company Energy Development Corp. ($1.3 billion) and Japan Tobacco’s buyout of beleaguered Mighty Tobacco ($1 billion).

Moreover, Nomura noted that debt instruments have been the bigger driver of FDI over the last few years.