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Net Inflow of Foreign Portfolio Investments Sustained

11.11.2005

Transactions in Bangko Sentral-registered foreign portfolio investments for the year through 4 November resulted in a net inflow of US$2.1 billion, 7.4 times the US$279.1 million figure for the same period last year and 4.2 times the US$486.8 million total for the whole of 2004.  On a gross basis, investments registered by the Bangko Sentral during the period totaled US$5.0 billion, almost three times the US$1.7 billion figure for the comparable period in 2004.  On the other hand, outflows/capital repatriations pertaining to registered foreign portfolio investments amounted to US$2.9 billion, more than twice the  US$1.4 billion total for the same period in 2004.

The bulk of the registered foreign portfolio investments* were in shares of stock listed with the Philippine Stock Exchange, followed by placements in peso-denominated government securities, peso time deposits in banks, and money market instruments issued by the local private sector.  These investments were funded with new inward remittances of foreign exchange converted into pesos through banks operating in the Philippines.

 For the two-day holiday-shortened week ending 4 November 2005, transactions in BSP-registered foreign portfolio investments posted a large net inflow of US$21.4 million on optimism that the implementation of the EVAT law, which finally took effect on 1 November, will help solve the fiscal crisis and  improve  the  country’s  credit  rating.  The  continued  easing of world oil prices and the appreciation of the peso, bolstered by substantial OFW remittances, also boosted investor sentiment during the week.   

 For the month of October 2005, a net inflow of US$17.0 million was recorded, with the US$29.0 million total net inflow of the first two weeks exceeding the US$12 million total net outflow during the last two weeks.  Investor sentiment during the second half of the month was affected largely by  lingering political concerns, the report of a P27.7 billion budget deficit in September (from a P1.8 billion surplus in August), the rise in key policy rates, and apprehensions over the negative effects of the implementation of the EVAT on inflation, consumption and overall economic growth. 

 New inward portfolio investments registered with the Bangko Sentral during the month totaled US$244.2 million, of which US$197.2 million or 81 percent were in PSE-listed securities. On the other hand, capital repatriations/outflows from BSP-registered investments amounted to US$227.2 million, mainly from the divestments in PSE- listed securities (US$105.0 million or 46 percent of total), and Fixed Rate Treasury Notes (US$68.5 million or 30 percent of total).

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* These statistics are different from foreign portfolio investments in the balance of payments which represent actual flows during the period under review.

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