Filipinos’ foreign portfolio investments down

Filipinos’ investments in stocks and bonds issued by foreigners declined at the end of last year, reflecting the drop in asset values as a result of the financial markets’ so-called “taper tantrum.”

Data released by the Bangko Sentral ng Pilipinas (BSP) this week showed Filipinos’ foreign portfolio investments were down semester-on-semester and year-on-year as market sentiment deteriorated.

“The drop in residents’ holdings of foreign portfolio investments as of end-December 2013 is reflective of weakened investor sentiment in anticipation of US Fed tapering, which commenced in January 2014,” the BSP said in its coordinated portfolio investment survey report.

As of the end of 2013, Filipinos’ foreign portfolio investments reached a total of $5.7 billion, 7 percent down from the $6.21 billion recorded in June of the same year, BSP data showed.

This was also lower by 15 percent year-on-year.

The decline was due to the decrease in holdings of both short-term (by 34.6 percent) and long-term debt securities (by 13.5 percent), specifically, treasury bills, commercial and financial paper and bonds.

Last year, the US Fed signaled its plan to reduce its asset purchases, which at the time was set at $85 billion a month. This so-called taper started in January of this year.

The Fed now buys just $35 billion in US Treasuries and mortgage-backed securities every month.

With the Fed cutting back on its asset purchases, interest rates and asset prices in the US are expected to rise, making the world’s largest economy more attractive to foreign investors who have favored emerging markets like the Philippines since the global financial crisis.

Filipino investors still heavily favored low-risk debt securities over equities.

Holdings of equity securities stood at just $243.8 million while debt made up the balance of $5.53 billion.

Long-term IOUs held by Filipinos stood at $4.7 billion.

Securities issued by the US government and American companies accounted for the biggest share of investments held by Filipinos.

About 32.4 percent of all portfolio investments were from the United States.

The second-biggest issuer was Indonesia, with a share of 16.1 percent.

Compared with the end-June 2013 level, an increase in residents’ holdings of securities was observed for issuances by Korea (7.9 percent) and Luxembourg (26.7 percent).

These increases were more than offset by the declines in residents’ holdings of securities issued by unrelated non-residents in the United States (17.8 percent), Australia (51.4 percent), Hong Kong SAR (11.9 percent) and China (8.5 percent).