PH still attracting FDIs, says Nomura | Inquirer Business

PH still attracting FDIs, says Nomura

/ 05:12 AM October 14, 2017

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.”

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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.

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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.

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TAGS: foreign direct investments (FDIs), Japanese investment, Nomura
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