Long term funds in PH lifted by foreign purchase of debt papers

MANILA, Philippines—Long term capital inflows into the Philippines surged in July, continuing a recovery in investments into the country this year after 2020’s downbeat numbers due to the onset of the COVID-19 pandemic, data from the central bank showed.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said foreign direct investment net inflows grew by 52 percent to $1.3 billion in July 2021 from the $831 million net inflows recorded in July 2020.

The improvement brought the cumulative net inflows of long term capital to $5.6 billion, representing a growth of 43.1 percent from the $3.9 billion net inflows in the first seven months of 2020.

“This was mainly on account of the 78.7 percent expansion in non-residents’ net investments in debt instruments to $3.9 billion from $2.2 billion,” the BSP said.

Reinvestment of earnings reached $677 million, 19.3 percent higher than the $567 million recorded a year ago. However, non-residents’ net investments in equity capital, other than reinvestment of earnings, declined by 12.4 percent to $1 billion from $1.1 billion in the comparable period last year.

The BSP said increases in foreign direct investment net inflows in July 2021 were due mainly to the 61.1 percent growth year-on-year in investments in debt instruments to $1.1 billion from $667 million. Similarly, reinvestment of earnings rose by 87.1 percent to $155 million from $83 million.

Non-residents’ net investments in equity capital contracted by 58.3 percent to $34 million in July 2021 from $81 million in the comparable month in 2020.

This developed as equity capital withdrawals increased by 634.7 percent to $57 million from $8 million, which more than offset the increase in equity capital placements by 2.6 percent to $91 million from $89 million.

The bulk of equity capital placements during the month came from Japan, the United States and Hong Kong. These investments were channeled mostly to the manufacturing, real estate, and financial and insurance industries.

On a year-to-date basis, net investments in equity capital decreased by 12.4 percent due to the downturn in placements by 9.5 percent to $1.2 billion from $1.4 billion and the increase in withdrawals by 6.0 percent to $223 million from $210 million.

Equity capital placements emanated largely from Singapore, Japan and the United States. These were infused mostly in the manufacturing, financial and insurance, and electricity, gas, steam, and air-conditioning industries.

TSB