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Foreign Portfolio Investments Post Net Outflow in March

04.25.2008

March 2008 Flows

Transactions in Bangko Sentral-registered foreign portfolio investments resulted in a net outflow of US$197.7 million in March, which contrasted to the US$370.9 million net inflow in February and the US$173.2 million net inflow in March last year.  Heightened worries over the impact of the slowdown of the U.S. economy and the tight credit conditions in major financial markets have adversely affected investments in emerging markets, including the Philippines.  A number of positive domestic economic reports, however, mitigated investors’ concerns, including the 53 percent year-on-year decline in the fiscal deficit in January and reports of robust corporate earnings for 2007.   
 
On a gross basis, registered foreign portfolio investments 1 in March aggregated US$738.8 million, 78 percent (US$578.6 million) of which went to shares listed in the Philippine Stock Exchange (PSE).  Investments in  peso-denominated government securities, primarily Fixed Rate Treasury bonds or FXTBs and placements in peso time deposits accounted for  18 percent and 4 percent, respectively, of registered investments.  Capital repatriations amounted to US$936.5 million, broken down as follows:  a) divestments from PSE-listed shares (38 percent) and government securities (23 percent); and b) withdrawals of peso bank deposits 2 (39 percent).

January-March 2008 Flows

For the first quarter of the year, foreign portfolio investment transactions posted a net outflow of US$63.8 million, from an US$838.0 million net inflow for the comparable period in 2007.  This development was due primarily to the deepening global credit crisis, which has also driven investors back to more developed markets. By type of instrument, investments in PSE-listed shares and government securities managed to register net inflows of US$525.3 million and US$98.1 million, respectively, while peso bank deposits posted a net outflow of  US$687.2 million.
  
Gross investment inflows reached nearly US$3.1 billion during the quarter, 13 percent short of the US$3.5 billion total recorded for the same period in 2007.  Investments in PSE-listed shares of US$1.8 billion (almost half of which was invested in telecommunications and property firms) accounted for 59 percent of the total.  This amount represented only 64 percent of the US$2.8 billion level last year. In comparison, investments in peso-denominated government securities, primarily FXTBs, and placements in bank deposits increased by 55 percent (to US$938.2 million) and  200 percent to US$336.0 million, respectively, to account for 30 percent and 11 percent of total investment flows.  The United Kingdom, Singapore and the United States comprised the top three investor countries during the quarter.

Meanwhile, gross capital outflows increased to over US$3.1 billion or by 17 percent from last year. The outflows arose from divestments from listed shares (40 percent of total) and government securities (27 percent), as well as withdrawals of peso bank deposits (33 percent).

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1  These statistics, which pertain to newly registered investments, are different from foreign portfolio investments in the balance of payments which represent actual flows during the period under review.

2  Generally represent temporary placements of sales proceeds from divestments from listed shares and government securities.

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