August net FDI inflow biggest in four months
NET foreign direct investments (FDIs) to the Philippines logged the highest in four months in August and pulled the year-to-date tally closer to the central bank’s forecast for the full year.
Net FDI inflows hit $711 million for the month, rising from $503 million recorded in July and surging by 32% from last year’s $539 million, the Bangko Sentral ng Pilipinas (BSP) said in a statement released yesterday.
A jump in investments of foreign firms in debt instruments of their Philippine subsidiaries and affiliates drove the higher August tally, offsetting a slip in equity placements from a year ago.
Net equity investments plunged to $8 million in August, 78.2% lower than the $37 million seen a year ago. Broken down, total placements of $49 million was partially offset by $41 million in capital that went out in August. This is lower than the net equity capital secured in August 2015, with $48 million in inbound capital offset by $11 million in total withdrawals.
That month, equity capital was infused mainly in real estate; manufacturing; wholesale and retail trade; electricity, gas, steam and air-conditioning supply; as well as arts, entertainment and recreation activities, the BSP said.
Moreover, foreign firms reinvested more earnings in Philippine operations, growing by 9.9% to $67 million from $61 million.
Funds placed in debt securities soared 44.2% to $636 million in August from $441 million the past year, as foreign investors supported their Philippine units’ current operations and expansion.
August inflows pulled the eight-month tally to $5.406 billion, 71.1% more than the $3.159 billion net FDI seen in the comparable year-ago period and closer to the central bank’s $6-billion forecast for 2016.
The biggest sources of foreign capital in those eight months were Japan ($871.43 million), Singapore ($168.99 million), the United States ($90.39 million), Taiwan ($82.4 million) and Hong Kong ($51.29 million).
“The sustained FDI inflows were buoyed by investors’ confidence in the economy on the back of the country’s sound macroeconomic fundamentals,” the BSP said in a statement.
Shortly after assuming their posts, President Rodrigo R. Duterte’s economic managers announced plans for more aggressive spending with a focus on infrastructure and social services as the administration strives to achieve and sustain 7% economic growth annually until it steps down in 2022 — the pace seen needed to lift more Filipinos out of poverty.
One analyst said the investment inflows reflected market confidence in the Philippine economy despite a change in government.
“While the PSEi (Philippine Stock Exchange index) retreated in recent months, strong fundamentals have not been altered in the political transition. Some positive signs can also be seen with the latest September trade data,” said Jingyi Pan, market strategist at IG Singapore.
“Coupled with the focus on infrastructure projects by President Duterte, the FDI is likely to be a reflection of confidence in growth.”
The Philippine economy grew by 6.9% last semester, already just below the top end of the government’s 6-7% full-year projection.
Multilateral lenders now project full-year Philippine growth at 6.4% amid expectations that investments and public spending will further pick up.
“The trend certainly appears to be building up towards the target,” Ms. Pan added, referring to the $6-billion official forecast set for the year that would be 4% more than 2015’s actual $5.724 billion.
Asked for prospects for inward investments for the rest of the year, Ms. Pan said: “The US election has brought markets on a wild ride thus far and the latest market sentiment seems to be focused on the positive aspects of his (Donald J. Trump) campaign, which can be pro-growth.”
“Nevertheless, we have yet to hear of his concrete economic agendas which could shape market sentiment as they are revealed.”
Emmanuel A. Leyco, public finance and policy professor at the Asian Institute of Management, said FDIs are can be expected to grow during the term of Mr. Duterte, who has been rebalancing economic ties towards Southeast Asian economies, as well as China, Japan and South Korea.
Comment here