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Net Inflow from Foreign Portfolio Investments Increases Further in July

08.11.2006

Transactions in Bangko Sentral-registered foreign portfolio investments in July resulted in a net inflow of US$117.3 million, a 10 percent improvement from the US$106.3 million in June.  Easing foreign interest rate concerns and a string of positive developments encouraged greater foreign investments during the month.  These included the further slowdown in the inflation rate to 6.7 percent in June, the government’s third consecutive month of budget surplus in June, the 17.3 percent hike in exports in May, and the strong earnings results reported by some blue chip companies.  The escalating violence in the Middle East, record high oil prices and renewed threats to regional security, however, limited the rise in the net inflow from foreign portfolio investments.

New investments in July amounted to US$523.9 million, and consisted of Fixed Rate Treasury Notes or FXTNs (52 percent) and shares listed in the Philippine Stock Exchange or PSE (48 percent). These exceeded capital repatriations/ outflows of US$406.6 million, which arose mainly from divestments from FXTNs (US$223 million) and from listed shares (US$115 million).

During the period January to July 2006, registered foreign portfolio investments* and capital repatriations/outflows totaled US$3.884 billion and US$2.993 billion, respectively, for a net inflow of US$890.9 million.

On a gross basis, the bulk (67 percent) of the investments consisted of PSE-listed shares of US$2.596 billion, mainly shares in telecommunication, property and banking firms.  Investments in peso-denominated FXTNs of US$984.4 million accounted for 32 percent while investments in money market instruments of US$27.9 million and peso bank deposits of US$1.0 million  had a combined share of 1 percent.  The registered investments were funded with fresh inward remittances of foreign exchange converted into pesos through banks operating in the Philippines, 81 percent of which originated from Singapore, the United States and the United Kingdom.  

Foreign investments in PSE-listed shares dropped by 7 percent or US$192.2 million from the year-ago level because of the lower volume of international tranches of new and additional IPOs issued this year compared to last year, lower investments in telecommunication, holding and mining firms and the increase in foreign interest rates which were not matched by similar adjustments in domestic rates.  On the other hand, gross inflows from investments from foreign investments in government securities have overtaken last year’s total by US$26.9 million or 2 percent.

Meanwhile, capital repatriations increased by 41 percent from last year, mainly due to divestments from government securities of US$1.421 billion (48 percent of total), up by 121 percent from the year-ago level.  Divestments from listed shares of US$989.9 million and withdrawals of peso deposits of US$582.2 million (generally proceeds of earlier divestments from PSE-listed shares and government securities) accounted for 33 percent and 19 percent, respectively, of capital repatriations and were each about 7 percent higher than the corresponding level last year.  The large increase in capital repatriations may have resulted from moves by foreign investors to profit or cut losses from exchange rate movements and changes in prices of the listed shares/government securities. 

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