Foreign investments surge despite economic woes

Inflation may be near its highest in a decade and economic growth maybe slowing, but foreign direct investments (FDIs) continue to flow into the country at a rapid clip, the latest data from the Bangko Sentral ng Pilipinas showed on Monday.

The central bank said that long-term equity investments from overseas registered net inflows of $5.8 billion for the first semester of 2018, an increase of 42.4 percent from $4 billion last year.

“The continued inflows of FDIs indicate investor confidence in the Philippine economy on the back of strong macroeconomic fundamentals and growth prospects,” the BSP said, explaining the recurring phenomenon this year of strong long-term investment despite adverse developments that have also pushed the peso to near 13-year lows.

During the period, non-residents’ net investments of equity capital grew more than seven times to reach $1.6 billion. This came mainly from the 244.1-percent surge in equity capital placements to $1.7 billion alongside the 46.9-percent decrease in withdrawals to $163 million.

Equity capital infusions during the first semester were primarily from Singapore, Hong Kong, China, Japan and the US. These were invested mainly in manufacturing; financial and insurance; real estate; arts, entertainment and recreation, and electricity, gas, steam and air-conditioning supply activities.

The central bank said that higher investments in debt instruments were recorded also in the first half of the year amounting to $3.8 billion from $3.4 billion a year ago. Reinvestment of earnings rose to $420 million during the period.

For the month of June alone, FDIs posted net inflows of $831 million, which were 9.2-percent higher than the $761 million in the same month last year.

This was largely on account of non-residents’ net equity capital investments of $184 million during the month, a turnaround from the $67 million net withdrawals in June 2017.

“The improvement in net equity capital investments was due to the 83.6 percent expansion in gross placements of equity capital to $208 million, which more than offset withdrawals of $24 million,” the BSP said.

Equity capital placements came mostly from Singapore, Luxembourg, Japan, the US and the Netherlands.

By economic activity, equity capital placements were invested mostly in manufacturing; electricity, gas, steam and air conditioning supply; real estate; financial and insurance, and wholesale and retail trade activities.

Non-residents’ investments in debt instruments issued by their local affiliates, consisting of intercompany loans, amounted to $569 million, 24.6-percent lower than the $756 million recorded in June last year. Reinvestment of earnings increased by 7.1 percent to $77 million during the month.