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Foreign Direct Investments Post Net Inflows in September

12.10.2010

Foreign direct investments (FDI) sustained net inflows in September 2010 at US$66 million, a turnaround from the US$54 million net outflow recorded in the same month a year ago. The net inflows during the month were mainly driven by reinvested earnings and other capital which posted inflows (US$26 million and US$62 million, respectively) that more than compensated for the net outflows (US$22 million) recorded in the equity capital account.  The moderate inflows this year reflected cautious investor sentiment on the back of renewed concerns over the exposure of European banks to sovereign debt and the health of the American economy, notwithstanding the strong fundamentals in the domestic economy.

Year-to-date, net FDI inflows through September reached US$1.1 billion, 31.8 percent lower than the previous year’s level. This development was due to the decline in the inflows of equity capital.  In particular, net inflows from equity capital reached $185 million, 89.5 percent lower than the level posted in the comparable period last year, when large investments in a local beverage company and a local power corporation were recorded. Gross equity capital placements for the first nine months of the year came largely from the U.S., Japan, Singapore, Ireland, and Hong Kong.  These were channeled to the following sectors: banking; real estate; manufacturing (semiconductors, pharmaceutical and health care products, air conditioner, refrigerators and parts); mining; power generation; transport, storage and communication; and recreational, cultural and sporting activities.

Reinvested earnings during the nine-month period meanwhile surged to US$247 million from US$21 million in 2009, as some foreign investors opted to plow back earnings in local enterprises/corporations on the back of favorable domestic economic prospects and higher corporate earnings.

The other capital account, consisting mainly of intercompany borrowing/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines, reversed to a net inflow of US$661 million due to higher intercompany loan availments by local subsidiaries from their mother companies abroad.

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