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Foreign Portfolio Investments Post 35 Percent Increase In Net Inflow in 2007

01.10.2008

For the whole of 2007, Bangko Sentral-registered foreign portfolio investments posted a net inflow of over US$3.5 billion, 35 percent or US$917.9 million more than the US$2.6 billion figure for 2006.  This developed despite the net outflow of US$207.0 million in December, the second monthly net outflow in 2007 after August’s US$248.8 million. 

Optimism on the country’s economy prevailed during the year due to sustained strong economic fundamentals (such as the acceleration in GDP growth to its best record in three decades alongside the sharp slowdown in inflation, the improvement in the fiscal position and the large surplus in the balance of payments), the generally peaceful elections in May, the appreciation of the peso and strong corporate results.  Several large initial and follow-on offerings at the stock market also attracted foreign investors.  These positive developments in the domestic economy were, however, partly negated by a number of challenges on the external front such as the huge global equities sell-offs triggered by losses in the China and US stock markets during the first quarter of the year, the widening global credit crunch sparked by the subprime mortgage crisis in the US, soaring oil prices, and the slowing US economy. 

Gross inflows of registered foreign portfolio investments reached US$15.5 billion, a 95 percent growth from 2006’s US$8.0 billion.  Investments in PSE-listed shares amounted to US$12.5 billion, 80 percent of total and 118 percent higher than the figure for 2006.  Close to three-fourths of these investments went to property, telecommunications, utility and holding firms.  Investments in peso-denominated government securities, primarily Fixed Rate Treasury Notes, comprised 18 percent (US$2.8 billion) of total investment inflows while those in money market instruments and peso bank deposits accounted for the remaining two percent. 

Fresh inward remittances of foreign exchange converted into pesos through banks operating in the Philippines funded the above investments.   About 69 percent of these funds were provided by the United Kingdom, the United States and Singapore.

Meanwhile, gross capital outflows increased by 124 percent to US$12.0 billion from US$5.4 billion in 2006. The outflows arose from divestments from listed shares (48 percent of total) and government securities (20 percent), as well as withdrawals of money market placements and peso deposits (32 percent).  Foreign investors realized substantial gains on their investments, due largely to the appreciation of the peso.

Please see attached table for details.

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