FDI inflows jump 258% in January

MANILA, Philippines - Foreign direct investment (FDI) inflows to the Philippines almost quadrupled in January mainly due to the payment of the final tranche of the $1-billion deal between diversified conglomerate San Miguel Corp. and Kirin Holdings of Japan.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that FDI inflows surged 258 percent to $766 million in January from $214 million in the same month last year.

BSP Governor Amando Tetangco Jr. said the increase could be traced to the higher net equity capital inflows amounting to $739 million in January from only $31 million in the same month last year.

Equity placements surged by a dramatic 2,014 percent to $761 million from $36 million while equity withdrawals jumped 340 percent to $22 million from $5 million.

“In particular, gross equity capital placements reached $761 million due to inflows arising mainly from the final tranche of the share purchase agreement for the acquisition of shares of stock by a foreign firm in a local beverage manufacturing company,” Tetangco said.

Kirin Holdings bought a 43 percent stake in San Miguel in 2009 for $1.06 billion and spent another $300 million also in 2009 to acquire an interest in San Miguel Brewing International Ltd.

Tetangco said bulk of capital inflows in January came from the US, Australia, Kuwait, and Canada.

He pointed out that the funds were channeled to manufacturing, real estate, mining and quarrying, wholesale and retail trade as well as financial and insurance activities.

The BSP chief also cited the improved investor sentiment in the country due to favorable macroeconomic fundamentals.

“Positive economic developments, including strong external payment dynamics and favorable corporate earnings for 2011, helped boost investor sentiment,” Tetangco said.

The BSP reported that other capital account consisting largely of intercompany borrowing between foreign direct investors and their subsidiaries or affiliates in the Philippines plummeted by 103.4 percent to a net outflow of $5 million in January from $149 million in the same month in 2011.

Likewise, reinvested earnings declined by 5.9 percent to $32 million from $34million as foreign direct investors opted to retain part of their earnings in local enterprises.

International credit rating agencies took note of the country’s strong external payments position. New York-based Standard and Poor’s (S&P) recently raised the credit rating outlook to positive from stable, paving the way for a possible upgrade of the rating that its currently two notches below investment grade within the next six months to 12 months.

On the other hand, London-based Fitch Ratings rates the country’s sovereign credit at one notch below investment grade while Moody’s Investors Service as well as S&P rate the country’s sovereign credit at two notches below investment grade with a stable outlook.