Net foreign equity capital inflows rose significantly to US$526 million in May from only US$39 million a year ago, primarily as a result of a foreign equity capital placement in a local power holding company. This placement was in turn, used to buy shares in an independent power producer (IPP) company. The net equity infusion in May brought the level for the first five months of 2007 close to US$1.3 billion, an increase of almost a hundred percent over the level during the same period in 2006. The bulk of the inflows during the January-May period came from investors from the U.S., Japan, Singapore, and South Korea. By industry, funds were channeled mostly to the manufacturing (electronics, health and chemical products), services (international courier, information technology development), mining, real estate, financial intermediation, agricultural, power, and construction industries.
The other capital account–which consists largely of intercompany borrowing/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines–reversed to a net outflow of US$389 million in May, bringing the cumulative net outflow to US$373 million for the five-month period. This development reflected the repayments by subsidiaries of their loans to their mother companies. The peso strength and solid economic growth could have facilitated repayments. Meanwhile, reinvested earnings amounted to US$14 million year-to-date, 27.3 percent higher compared to the level in the comparable period a year ago.
Due to the repayment of intercompany loans, the cumulative FDI net inflows for the period January-May 2007 reached US$905 million, 22.5 percent lower than that recorded during the same period last year. Notwithstanding this, the actual FDI net inflows for the first five months remained on track relative to the projected FDI net inflows of US$2.1 billion for 2007.