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Foreign Portfolio Investments Post Net Outflow in September

10.17.2008

September 2008 Flows
 
Bangko Sentral Governor Amando M. Tetangco, Jr. reported that foreign portfolio investments registered with the Bangko Sentral posted a net outflow of US$312.2 million in September 2008, after net inflows of     US$20.2 million and US$187.5 million in July and August, respectively.  “This was due primarily to the meltdown in the U.S. financial markets, the effects of which have spilled over to other countries, and subsequent fears that a recession in major economies is imminent,” the Governor said.

Registration of foreign investments with the Bangko Sentral, which is voluntary, entitles the investor to buy foreign exchange from the banking system for repatriation of capital and remittance of dividends/earnings that accrue on the investments.
 
On a gross basis, registered foreign portfolio investments1   totaled US$517.3 million, of which 67 percent or US$348.7 million went to listed shares, 33 percent or US$167.8 million to government securities and less than 1 percent or US$0.8 million to peso bank deposits.  On the other hand, capital repatriations aggregated US$829.5 million and came from withdrawals of investments in listed shares (US$235.5 million or 29 percent), government securities (US$234.5 million or 28 percent), and peso bank deposits 2  (US$359.5 million or 43 percent).

January-September 2008 Flows

For the first three quarters of the year, transactions resulted in a net outflow of US$521.7 million, in sharp contrast to the US$3.4 billion net inflow for the comparable period in 2007.  Investor risk aversion, which started with the subprime mortgage crisis in the U.S., has deepened due to the surge in commodity prices and concerns over the impact of the U.S. financial crisis on other markets.  By type of instrument, investments in listed shares,  peso-denominated government securities and money market instruments posted net inflows of close to US1.8 billion, US$5.6 million and  US$2.6 million, respectively, while placements in peso bank deposits showed a net outflow of US$2.3 billion.  This development reflected greater preference for fixed income instruments given prevailing market conditions.

Gross investment inflows reached US$7.1 billion during the period, down 42 percent from the nearly US$12.2 billion level recorded in the same period last year.  Placements in PSE-listed shares of US$4.8 billion  (48 percent of which went to telecommunications and property firms) represented 68 percent of the total and fell by 52 percent from the almost US$10.1 billion level for 2007.  Investments in peso-denominated government securities of US$1.7 billion (24 percent) dropped by 11 percent from last year’s comparative figure of US$2.0 billion.  Meanwhile, investments in peso bank deposits of US$560.0 million and money market instruments of  US$4.1 million (accounting for 8 percent and less than 1 percent, respectively) showed marked increases of 294 percent and 227 percent, respectively, from their 2007 levels of US$142.1 million and US$1.3 million. The United Kingdom, Singapore and the United States remained the top three investor countries with their collective contribution of 69 percent of investment funds during the period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
Gross capital outflows totaled US$7.6 billion, reflecting a 13 percent drop from last year’s US$8.8 billion.  These came from withdrawals of investments from listed shares (40 percent of total), government securities  (23 percent) and money market instruments and peso bank deposits (combined 37 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  Largely represent temporary placements of earlier investments in listed shares and government securities pending subsequent reinvestment and/or repatriation.

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