Long-term foreign investments in PH surge for second straight month

Short-term funds are flowing out due to better yields overseas, but don’t tell that to long-term foreign investors who continue to plough their money into the Philippines on the back of what the central bank says is “confidence” in the local economy.

In a statement, the Bangko Sentral ng Pilipinas said foreign direct investments posted a net inflow of $573 million in February 2018, representing an increase of 46.4 percent from year-ago level—the second consecutive month this year that showed strong investment inflows.

This was due mainly to the 56.3-percent growth in investments in debt instruments, or intercompany borrowings between foreign direct investors and their subsidiaries/affiliates in the Philippines, amounting to $412 million.

“The sustained investment inflows reflect investor confidence in the country’s sound macroeconomic fundamentals and growth prospects,” BSP Governor Nestor Espenilla Jr. said.

Foreign direct investment net inflows for the first two months of 2018 rose year-on-year by 52.6 percent to $1.5 billion.

The strong performance in the first two months of the year sustained the positive momentum in the growth of foreign equity capital in the country after the central bank reported that businessmen from overseas brought into the country a record amount of investments in the first full year of the Duterte administration—a record high $10 billion in 2017, up by 21.4 percent from a year ago.

According to the central bank, net equity capital also rose by 55.4 percent to $96 million, as gross placements of $114 million more than compensated for the withdrawals of $18 million.

Equity capital placements came mostly from Hong Kong, the United States, China, the Netherlands and Japan. These were invested mainly in art, entertainment and recreation; real estate; manufacturing; construction, as well as electricity, gas, steam and airconditioning supply activities. Meanwhile, reinvestment of earnings amounted to $65 million during the period.

In particular, net investments in debt instruments reached $793 million, representing a 10-percent growth from year-ago level.

Net equity capital rose by more than fourfold to $569 million during the period.

The bulk of the equity capital placements came from Singapore, China, Hong Kong, Taiwan, and Japan. These were channeled to manufacturing; financial and insurance; real estate; art, entertainment and recreation, and electricity, gas, steam and airconditioning supply activities. Reinvestment of earnings reached $130 million.

BSP statistics on foreign direct investments cover actual investment inflows, which could be in the form of equity capital, reinvestment of earnings and borrowings between affiliates. In contrast to investment data from other government sources, the BSP’s data include investments where ownership by the foreign enterprise is at least 10 percent.

Data of investment promotion agencies do not make use of the 10-percent threshold and include borrowings from foreign sources that are nonaffiliates of the domestic company. —DAXIM L. LUCAS