FDI slows 27% to $3 B

MANILA, Philippines - The amount of foreign direct investments (FDIs) flowing into the Philippines surged in August but was still down 27.1 percent amid the global stock market rout due to uncertainties brought about by the impending interest rate hike by the US Federal Reserve and the economic slowdown in China.

The Bangko Sentral ng Pilipinas (BSP) reported yesterday FDI inflows amounted to $526 million in August this year or $27 million higher compared to the $499 million registered in August last year.

Equity placements plunged 75.9 percent to $45 million in August this year from $121 million last year, while withdrawals went up 43.1 percent to $11 million from $8 million.

The BSP said equity capital placements came mainly from the US, Japan, Singapore, Taiwan, and Ireland.

The funds, the central bank added, were channeled primarily to manufacturing, real estate, professional, scientific, and technical, wholesale and retail trade activities, as well as information and communication acitivites.

On the other hand, earnings of foreign companies operating in the Philippines and plowed right back into the country inched up 2.8 percent to $61 million in August this year from $59 million in the same month last year.

The BSP said intercompany borrowings from foreign direct investors by their subsidiaries or affiliates in the Philippines helped offset the sharp drop in equity placements and higher withdrawals in August.

Data showed non-residents’ net investments in debt instruments, including net intercompany borrowings, surged 634.5 percent to $431 million from $59 million.

“This on account of more than seven-fold increase in investments in debt instruments. The increase in debt instruments more than compensated for the decline in net equity capital investments during the period,” the BSP said.

For the first eight months of the year, the BSP reported FDIs amounted to $3 billion or $1.12 billion lower compared to a year-ago level of $4.12 billion.

Equity placements coming from the US, Singapore, Japan, Hong Kong, and Germany fell 25 percent to $1.07 billion from January to August compared to $1.44 billion record in the same period last year.

The fresh equity was infused into manufacturing, financial and insurance, real estate, wholesale and retail trade, as well as electricity, gas steam, and air conditioning supply.

However, the amount of equity pulled out from the country also fell 48.3 percent to $236 million from $457 million.

On the other hand, reinvestment of earnings decreased by 11.2 percent to $52 million from $591 million while investments in debt instruments or lending by parent companies abroad to their local affiliates to fund expansion fell 35.8 percent to $1.64 billion from $2.55 billion.

The impending interest rate liftoff in the US, as well as the economic slowdown in China, continued to spook global financial markets.

The decision of the People’s Bank of China to devalue the Chinese yuan last Aug. 11 and the blood bath in the global stock market last Aug. 24 prompted investors to cash in on their profits.