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Net Foreign Portfolio Investment Inflow Rises in First Half

07.20.2004

In a press release issued today, Bangko Sentral Governor Rafael B. Buenaventura reported that for the period January-July 2, 2004, foreign portfolio investment transactions resulted in a net foreign exchange inflow of US$272.0 million, over 6 percent or US$16.1 million higher than the US$255.9 million figure for the same period in 2003. The data were based on reports of the five major custodian banks submitted weekly to the BSP.

Non-resident investments in peso bank deposits and in government securities/money market instruments recorded net inflows of US$236.6 million and US$80.4 million, respectively. On the other hand, non-resident investments in securities listed in the Philippine Stock Exchange posted a net outflow of US$45.0 million. The investments in peso bank deposits reported by custodian banks largely involve funds parked temporarily for eventual investment in the other instruments, particularly listed shares and government securities.

On a gross basis, foreign portfolio investment inflows totaled US$1,084.4 million, 82 percent more than the US$594.4 million figure in the comparable period in 2003. Withdrawals of foreign portfolio investments amounted to US$812.4 million, up by 140 percent from US$338.5 million last year.

The first six months of the year all registered net inflows in foreign portfolio investment transactions. However, there was a decreasing trend during the first quarter (US$47.8 million in January, US$36.9 million in February and US$16.8 million in March) as heightened political concerns, the peso’s weakness, fears on CalPERS’ withdrawal from the Philippines and renewed security concerns affected investors despite the higher-than-expected 2003 GDP growth rate and the bullish outlook for most blue chip companies.

April had the highest net inflow of US$70.8 million, with the peso’s recovery back to the P55 per dollar levels, the projected strong first quarter corporate earnings and CalPERS’ decision to retain its investments in the country. The net inflow dropped to US$23.5 million in May largely because of the delayed canvass of votes by Congress but rose in June to US$58.9 million with the proclamation of President Arroyo.

For the week ending July 2, 2004, which covers the last three working days of June, a net inflow of US$17.3 million was reported amidst three key events which occurred during the week: the inauguration of President Arroyo, the 25 basis-point rise in US interest rates and the turnover of power in Iraq.

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