$271.8M net outflow of hot money in January­–May

17 June 2008 – In the first five months of the year, Bangko Sentral–registered foreign portfolio investments posted a net outflow of $271.8 million, a stark contrast to the $1.7 billion net inflow in the same period last year.

The BSP attributes the investment slowdown to the continued increase of oil and other commodity prices, the overall slowdown of the economy, and the weakening of the peso. Since the start of the year, except in February, foreign portfolio investments have posted a net outflow. The gross capital outflows, which increased 17% year-on-year, came from proceeds of withdrawals of investments from listed shares (41% of the total), government securities (23%), and peso bank deposits (36%).

Monthly Flows on BSP-Registered Foreign Portfolio Investments
2007 and 2008, in million dollars

Net FDI inflows reach $1.9B in
January-September

10 December 2007 – Net foreign direct investments in the first nine months of the year reached US$1.9 billion, 22.3% higher than the US$1.6 billion posted a year ago. The Bangko Sentral ng Pilipinas reported that continued investments of nonresidents in equity capital, plus reinvested earnings, led to US$44 million in net FDIs in September. Equity capital investments netted US$95 million in September, while reinvested earnings was measured at US$20 million.

These combined inflows offset the net outflow in the “other capital” account, comprised largely of intercompany lending between foreign direct investors and their subsidiaries in the Philippines. From January to September, the “other capital” account posted a net outflow of US$229 million.

Equity capital placements by foreign investors were infused into the manufacturing, services, real estate, construction, mining, financial intermediation, and agricultural sectors. Most of these investments came from the U.S., Japan, Singapore, South Korea, Hong Kong, Germany, and the U.K.

Foreign portfolio investments post net outflow in August

13 September 2007 – Foreign portfolio investments registered with the Bangko Sentral ng Pilipinas posted a net outflow of US$246.6 million in August. The gross investment inflow for the month was recorded at US$1.4 billion, but the gross capital outflow was higher at US$1.6 billion. According to the BSP, foreign investors chose to be cautious due to concerns over the impact of the U.S. subprime mortgage problem on the global credit market.

For January to August, however, the net inflow of US$3.4 billion was 3.3 times the US$1 billion net inflow for the same period in 2006. Most of the portfolio investments, around US$9.3 billion (or 74%), went to stocks listed at the Philippine Stock Exchange, particularly to the property, telecommunication, and utility sectors, as well as to holding firms.

BOI-approved invesments down, PEZA invesments up

31 August 2007 – In the first seven months of the year, the Board of Investments approved 169 projects with a total project cost of P68 billion, which is 16.8% lower than the P81.7 billion worth of investments in the same period last year. On the other hand, the Philippine Economic Zone Authority approved 274 projects with a total investment cost of P81.1 billion, a growth of 135% from a year ago.

Despite the negative growth in the total worth of investments that passed through the BOI, the number of jobs created by these projects added up to 30,443, a noteworthy improvement over the 22,180 jobs created last year.

In July alone, the BOI reported approving 24 projects that will bring in a total of P6.84 billion in investments and provide jobs for 4,672 workers. The manufacturing, mining and quarrying, and transport, storage, and communication sectors were the main recepients of the investments.

Meanwhile, of the P81.1 billion worth of investments okayed by PEZA, 66% are foreign projects, while 34% are commitments made by local investors.

PEZA-approved investments in July reached P11.9 billion, 39.6% higher than the P8.6 billion in July 2006. These projects are expected to produce 12,548 jobs, bringing the total number of expected jobs created from January to July by projects okayed by PEZA to 54,170.

Combined investments for the two state-led promotion agencies showed a 28% increase to P149 billion compared to the same period last year.

Net foreign portfolio investment inflow exceeds US$1B in July

16 August 2007 – The net inflow of Bangko Sentral-registered foreign portfolio investments reached US$1.06 billion in July, bringing the accumulated net inflow from January to July to US$3.6 billion. The investment surge was mainly due to the large initial public offerings of such companies as the Aboitiz Power Corporation and GMA Holdings, as well as the sale of a large bloc of shares in the Philippine National Oil Company–Energy Development Corporation.

About 82% of the US$8.1 billion gross investment inflow went to shares listed at the Philippine Stock Exchange, majority of which went to property, telecommunications, utility, and holding firms. The remaining 16%, or US$1.5 billion, went to peso-denominated government securities.

According to the Bangko Sentral ng Pilipinas, foreign investors’ interest was sustained after it adjusted key policy rates downward and removed the tiering system on bank placements. The low inflation rates also contributed to the favorable investment environment.

Net FDI inflow down 22.5% in
January to May

10 August 2007 – Foreign direct investments in May posted a net inflow of US$151 million, bringing the net FDI inflow from January to May to US$905 million. This is 22.5% lower than the cumulative figure of US$1.16 billion a year ago, despite the significant increase in the net foreign equity capital inflow in the first five months, which rose 99% to US$1.3 billion.

According to the Bangko Sentral ng Pilipinas, the repayment of intercompany loans resulted in the drop in the net FDI inflow. Nevertheless, the BSP is confident that the projected net FDI inflow of US$2.1 billion for 2007 will still be reached.

Subic attracts US$1.4B in
investments in H1

8 July 2007 - The Subic Bay Metropolitan Authority reports that committed investments in the Subic Bay Freeport Zone reached US$1.37 billion in the first half of the year, 2% higher than in the same period in 2006. The increase was aided by the expansion projects of existing locators in the freeport, led by Hanjin Heavy Industries & Construction Co., one of the world’s largest shipbuilders.

The Korean company poured in an additional US$684 million, on top of its initial investment of US$1 billion, to complete the construction of its shipbuilding facility in the freeport. Aside from the Hanjin investment, the Aboitiz group and Taiwan Cogen also committed to invest US$431.6 million for their joint-venture 300-megawatt power project.

Other major investments registered with the SBMA in January to June were those of KT Global Subic (US$127 million), Subic Bay International Terminal Corp. (US$89 million), Philip Morris Philippines Manufacturing (US$20 million), Shin Young Corp. (US$5.37 million), Baypointe Hospital and Medical Center (US$4.07 million), Pacific Peal Airways.com Corp. (US$2.12 million), Orient Pearl Entertainment & Management Corp. (US$1.42 million), and Carag & Cook C4 Solutions (US$1.39 million).

Net FDIs up 18.5% in Q1

8 June 2007 – Net foreign direct investments in the first quarter of 2007 grew 18.5% year-on-year to US$710 million, mainly due to the overwhelming surge of investments in February. Net FDIs in March actually fell 62% to US$48 million from US$125 million a year ago as investors paused to wait for the outcome of the May mid-term elections.

Placements of equity capital doubled to US$755 million in the first quarter from US$382 million in the same period last year. Majority of the investments went to manufacturing (electronics and health products), services, mining, real estate, financial intermediation, agriculture, and construction. Reinvested earnings amounted to US$8 million, while the other capital account, the bulk of which were loans granted by head offices to their subsidiaries in the Philippines, amounted to US$20 million.

The Bangko Sentral ng Pilipinas expects FDI inflows to remain positive in the remaining months of the year given the buoyant first-quarter GDP growth of 6.9%, the stability of prices, and favorable corporate earnings.

Net foreign portfolio investments in April up 40% from March

17 May 2007 – Foreign portfolio investments registered at the Bangko Sentral ng Pilipinas posted a net inflow of US$243.10 million in April. This is 40% higher than the US$173.21 million recorded in March and a 140% higher than the net inflow of hot money in April last year.

For January to April, net foreign portfolio investments reached US$1.08 billion. Gross inflows were recorded at US$4.40 billion, which went primarily to Philippine Stock Exchange–listed shares in the property, telecommunication, utility, and banking sectors, and holding firms. On the other hand, gross capital outflows from January to April was measured at US$3.36 billion, 146% higher than a year ago. The marked increase in capital repatriations is said to be due to the peso’s continued rise, which has resulted in foreign exchange gains for investors.

Net FDI inflow rises 51% in January

10 April 2007 – The net inflow of foreign direct investments reached US$357 million in January, a 51% growth from the US$237 million recorded in the first month last year.

The positive outlook on the country’s investment climate apparently persuaded foreign companies and banks to reinvest US$220 million of their earnings in their local branches. A year earlier, reinvested earnings amounted to only US$2 million. January net equity capital flows also rose by 67% to US$70 million from $42 million a year ago. On the other hand, other capital or loans extended by head offices to subsidiaries in the country dropped 65%, from US$193 million in January last year to only US$67 million this year.

Manufacturing (chemical products and electronics), services (international courier), real estate, financial intermediation, and construction were the industries that benefited most from FDI inflows in January.

BOI, PEZA-approved investments surge 125% in January–February

22 March 2007 – Combined investments approved by the Board of Investments and Philippine Economic Zone Authority in January and February reached P26.8 billion, a 125% increase from the P11.9 billion worth of approved investments in the same period last year.

The BOI approved 49 projects worth P6.81 billion in the two-month period, while PEZA approved 80 projects amounting to P19.97 billion. Projects related to manufacturing and information technology services accounted for P22.5 billion of the P26.8 billion total.

According to Trade Secretary Peter Favila, these investments are expected to generate 25,131 new jobs, 76% higher compared to the 9,125 jobs created a year ago.

Foreign investors, led by Japanese ad American investors, committed to pour in P15.6 billion worth of investments. Local investors, on the other hand, committed to infuse P11 billion.

Amendments to BCDA Act
signed into law

20 March 2007 – President Gloria Macapagal-Arroyo today signed into law RA 9400 and RA 9399, both of which amend the Bases Conversion Development Authority (BCDA) Act to attract more investments and increase job opportunities in four freeport zones.

RA 9400 grants tax and duty incentives to locators in the Clark Special Economic Zone in Pampanga, Camp John Hay in Baguio City, Poro Point in La Union, and the Bataan Economic Zone in Morong.

RA 9399, on the other hand, provides a one-time amnesty on taxes and duties incurred by investor-locators in the four economic zones when the Supreme Court excluded them from incentives previously provided under the BCDA Act. Under the new law, investor-locators will only have to pay a 5% tax on gross income earned, 3% of which will go to the national government and 2% to the treasurer’s office of the host municipality or city.

Foreign business groups seek “open skies” policy in Clark

20 March 2007 – The Joint Foreign Chambers of the Philippines (JFC) is urging the government to rescind Executive Order 500-A, which limits flight privileges at the Diosdado Macapagal International Airport (DMIA) to official foreign carriers only. In its place, the JFC is lobbying for the adoption of EO 500-B, which restores the open skies policy put in place by EO 500 in January 2006.

“In the absence of service to Clark by designated carriers and to accelerate the development of DMIA as a premier air destination, the legal fundamentals for carriers to use DMIA outside the protocols of bilateral agreements should continue and be regularized,” the JFC said in a statement. The group believes EO 500-B will promote long-term policy stability and ensure growth and investment.

In a related issue, the JFC also pointed out that recent actions of the Civil Aeronautics Board could jeopardize the success of the government’s aviation policy. In February, the CAB awarded Singapore-based budget carrier Tiger Airways a three-month operating permit covering April to June 2007. The JFC is questioning the three-month limit as this is lower than the “traditional worldwide industry practice” of six months.

CAB executive director Carmelo Arcilla explained that the case of Tiger Airways is still subject to reconsideration.

Jan-Feb net “hot money” inflow up 58%

15 March 2007 - The net inflow from foreign portfolio investments posted a 57.9% increase to US$665 million in the first two months of 2007 from US$421.3 million in the same period last year. The Bangko Sentral ng Pilipinas attributes this growth to the positive economic reports: the 2006 GDP performance of 5.4%, the approval by the BSP of initial reforms in the foreign-exchange regulatory framework, the lower-than-target budget deficit in 2006, and the continuing appreciation of the peso.

The gross hot money inflow of US$2.260 billion exceeded the US$1.595 billion capital outflow during the two-month period. About 81% of the gross investment inflow went to shares listed in the Philippine Stock Exchange, the bulk of which were spread among companies under the property, telecommunications, utility, and banking sectors. Government securities, primarily fixed-rate treasury notes, accounted for 15%, while investments in money market instruments and peso bank deposits had a combined share of 4%.

Net FDI in 2006 hits US$2.35B

9 March 2007 – Net foreign direct investment increased 26.4% to US$2.35 billion in 2006 from US$1.85 billion in 2005.

The Bangko Sentral ng Pilipinas credits the high level of FDIs to net inflows in the equity capital account and other capital accounts channeled into the manufacturing, services, real estate, financial intermediation, mining, and construction industries. The BSP also credits part of this upturn to declining inflation, macroeconomic gains in 2006, and the strong external payments position of the country.

The countries that injected the most significant direct investments into the Philippines were Japan, the U.S., the Netherlands, Germany, the U.K., and Switzerland.

The World Bank noted, however, that despite the relative growth in FDIs, the investment rate remains low at under 15%. “This is extraordinarily low and raises the question of sustainability of growth. There are questions why growth has not created more employment and more income, thereby, more rapid poverty reduction,” World Bank country representative Joachim von Amsberg pointed out in a speech delivered last week.

Meanwhile, the Japan External Trade Organization (JETRO) recently released its survey on the international operations of Japanese firms. The survey shows that Japanese investors (52.5% of respondents) think the Philippines is the riskiest place in Asia to do business in terms of political and social instability.

Among 19 markets worldwide, the Philippines is the second to the last country that Japanese firms would transfer to or expand their operations in the next three years. A total of 177 firms took part in the study.

Stock index closes near
3,200-point barrier

23 January 2007 – The Philippine Stock Exchange’s composite index rose for the fourth straight day, closing at 3,199.34 points, a level the market last hit almost 10 years ago. The PSEi gained 58.06 points from the previous day, when the index rose beyond the 3,100 barrier. It was the bourse’s best finish since 31 March 1997, when the market closed at 3,222.98 points.

Positive economic prospects continue to drive the stock market. Although the government’s economic managers are targeting a GDP growth rate of 6.1%–6.7% this year, most private-sector analysts and institutions project the domestic economy to grow within a range of 5.3%–5.8%. Furthermore, despite the 3.9% growth in agriculture and fishery production last year, the National Economic and Development Authority still expects GDP growth to hit its low-end target of 5.5% for 2006.

Reduction on fiscal incentives expected for 2007

8 January 2007 – During an interagency core group meeting last month, the Department of Finance successfully lobbied for the scrapping of incentives extended to the retention, expansion, and diversification (RED) program in the proposed 2007 Investments Priorities Plan (IPP).

The RED program, which was included in last year’s IPP, was designed to encourage existing investors to maintain, expand, or diversify their operations in the country. Under the proposed policy guidelines for this year, only projects of micro and small enterprises, as well as export-oriented and agribusiness projects, are eligible for full incentives. Other projects may be given incentives on a case-to-case basis.

Trade and Industry Secretary Peter Favila and Finance Secretary Margarito Teves have also agreed that the Board of Investments will first consult the DOF before it grants incentives to business applicants.

These changes are in line with the government’s campaign to control its fiscal deficit and balance the budget by plugging revenue leakages. Meanwhile, the fiscal incentives rationalization bill is still being reviewed in Congress.

BOI, PEZA investments in January–October surge 32.7%

11 November 2006 – New investments registered under the Board of Investments and Philippine Economic Zone Authority in January to October surged 32.7% to P219.9 million from P165.7 last year. BOI-registered investments in the 10-month period totaled P153.4 billion, while PEZA attracted P66.5 billion.

The 568 new investments recorded resulted in the creation of 112,000 jobs. Local investors poured in P135.3 billion, a 36% growth from last year, while foreign investors infused P84.6 billion, 28% higher compared to a year ago.

Trade Undersecretary Elmer Hernandez expressed optimism that the Department of Trade and Industry’s target of about P250 billion worth of investment flows by yearend would be met.

Net FDIs in January–August up 20%

10 November 2006 – Net foreign direct investment flows in January to August rose 20% to $1.36 billion from $1.13 billion a year ago. This was reported by the Bangko Sentral ng Pilipinas, which attributed the growth to the improved fiscal position of the country and the expansionary activities of some companies anticipating greater demand.

The BSP also explained that the recent credit outlook upgrade by Moody’s Investors Service from “negative” to “stable” confirmed the positive sentiment of investors regarding the Philippine economic climate, which might continue to lift FDI flows in the near future.

A big chunk of the FDIs that flowed in came from investors from the U.S., Japan, United Kingdom, Hong Kong, Germany, and Switzerland.

Net foreign portfolio investments
down 10%

9 November 2006 – Net foreign portfolio investments from January to October amounted to US$1.85 billion, down 10% from last year’s US$2.05 billion.

The Bangko Sentral ng Pilipinas reported that gross capital outflows for the period hit US$4.41 billion, up from US$2.92 billion a year ago, which affected the net foreign portfolio investment figure. The BSP blamed high capital repatriations, particularly divestments from government securities, for the rise in capital outflows.

In October, hot money inflows reached US$451.70 million, which the BSP attributed to the continued slowdown of the inflation rate, the continuing strength of the peso, and expectations of strong third-quarter corporate earnings.

BOI, BIR discover gov't losses from foregone revenues

30 October 2006 – The Board of Investments and Bureau of Internal Revenue recently discovered that the government is losing billions of pesos in revenues because of income tax holidays being claimed by ineligible firms.

BOI managing head Elmer Hernandez bared that the two agencies compared the list of companies granted with income tax breaks against those who actually availed of them. The activity revealed that a big number of firms got away with paying less taxes to the BIR by claiming eligibility to tax holidays in their income tax declarations. The actual amount of the government’s losses from the foregone revenues, as well as the list of erring companies, was not yet disclosed, however, as the study is still ongoing.

As a result of this discovery, the BOI and BIR will be forging a memorandum of agreement that will provide the framework for the administration and monitoring of fiscal incentives, particularly income tax holidays.

BOI, PEZA investments increase 31% in January-September

16 October 2006 – Investments approved by the Bureau of Investments from January to September amounted to P142.3 billion, while investments under the Philippine Economic Zone Authority for the same period grew to P58.1 billion. This brought combined new investments for the first nine months to P200.4 billion, a 31% increase from the P153.3 billion posted a year ago.

Elmer Hernandez, BOI managing head and trade undersecretary, reports that the new investments encompass 512 projects and are expected to generate 104,430 fresh jobs. He is confident that the P254 billion investment target for this year will be reached, and may even be surpassed, since the country has already hit 79% of the targeted amount.

Foreign investments, worth P75.6 billon, accounted for 38% of total investments approved. On the other hand, local investments, amounting to P124.9 billion, accounted for 62% of the total.

Net foreign portfolio investments shoots up in September

13 October 2006 – The net inflow of foreign portfolio investments in September posted a huge increase to US$373.7 million from US$131.5 million in August. The Bangko Sentral ng Pilipinas is attributing this rise in investor confidence to the growth in GDP, the slowing down of the inflation rate, the budget surplus posted in August, and the continued strengthening of the peso.

In September, total registered foreign portfolio investments reached US$805.9, while capital outflows were recorded at US$432.2. Meanwhile, for January to September, net foreign portfolio investments totaled US$1.396 billion. About 78% of the investments inflows were for shares listed in the Philippine Stock Exchange, while the rest went to government securities.

Cumulative net FDIs surpass US$1B
as of July

11 October 2006 – According to the Bangko Sentral ng Pilipinas, net foreign direct investments from January to July reached US$1.154 billion. This was made possible by the US$158 million in inflows posted in July, a threefold increase from the same period last year.

The BSP reported that the country’s strong economic fundamentals, particularly the improvement in fiscal performance and the easing of the inflation rate, bolstered FDIs during the review period. The sectors that benefited from these investments were manufacturing (cigarette paper mills, chemicals, health care, electronics, air conditioning systems, and steel products), services (business process outsourcing, resort facilities, engineering, construction, and facilities management), financial intermediation, and real estate.

By the end of 2006, the BSP expects net FDIs to reach US$1.90 billion.

Listed firms post 29.7% earnings growth in H1

20 September 2006 - Based on the audited financial statements submitted by 231 listed firms to the Philippine Stock Exchange as of 19 September, overall earnings of the listed companies grew 29.7% in the first half of 2006 to P106.6 billion from P82.21 billion in the same period in 2005.

PSE president and chief executive officer Francis Lim said that the impressive income performance of listed companies “reaffirms perceptions that the economy stands on solid ground, despite the challenging environment here and abroad.”

FDI flows post 348.5% growth in Q2

15 September 2006 – The National Statistical Coordination Board reports that foreign direct investments recorded a big 348.5% hike in the second quarter to P52.7 billion from P11.7 billion in the same quarter last year.

Investment pledges to the manufacturing sector accounted for 47% of total approved FDIs in the second quarter, posting a 167.6% increase to P24.8 billion from P9.3 billion a year ago. The increase in FDI pledges to the services sector was also notable, rising 32.8% in the last quarter to P2.9 billion from P2.2 billion a year ago.

RP less business-friendly in 2006—World Bank report

7 September 2006 – The World Bank and International Finance Corporation have ranked the Philippines 126th out of 175 economies in terms of ease of doing business in 2006. The country slipped five ranks from the 121st spot in 2005.

Ten areas of business regulation were gauged in the report. The Philippines remained steady at 118th in terms of ease of employing workers and 151st in protecting investors. However, the country incurred large drops in its rankings in ease of paying taxes (down 10 places to 106th from 96th), starting a business (down 9 places to 108th from 99th), and enforcing contracts (also down 9 places to 59th from 50th). In registering property, the Philippines fell to 98th place from the 91st spot, while in getting credit, the country went down to 101st from 96th. In ease of closing a business, the Philippines dropped to 147th place from 143rd. Meanwhile, the country’s ranking deteriorated slightly only in the area of trading across borders (falling to 63rd from the 61st spot) and in dealing with licenses (down to 113th from 112th).

Net FDIs rise 52.6% in the first 5 months

10 August 2006 – Net foreign direct investments in January to May rose 52.6% to US$743 million from US$487 million a year ago. The Bangko Sentral ng Pilipinas attributes the surge to the reversal of the “other capital account” (which consists of the borrowing and lending of funds between foreign direct investors and their local subsidiaries, particularly in the electronics and automotive sectors) to a surplus of US$402 million from a net outflow of US$63 million. Net reinvested earnings also rose to US$17 million from US$10 million. On the other hand, net equity capital shrank 40.0% to US$324 million from US$540 million.

Net foreign portfolio investments, however, contracted 56.9% to US$819.7 million as of 21 July compared to US$1.9 billion a year ago.

PEZA investments grow 15% in
first 5 months

22 June 2006 – The Philippine Economic Zone Authority approved 196 investment projects worth P21.2 billion in the first five months, up from 119 projects worth P18.4 billion registered a year ago. PEZA expects these projects to generate employment for 40,718 people, 44.5% higher than the 28,173 estimated jobs a year ago.

Projects on information technology grew 103.2% during this period to P3.6 billion from P1.7 billion last year. These are seen to provide an estimated 20,339 jobs, 114.3% up from 9,492 jobs a year ago.

Meanwhile, export revenues from the country's economic zones rose 10.4% to US$10.7 billion in the first four months from US$9.6 billion a year ago.

Net foreign portfolio investments down 63.2% as of first week of June

9 June 2006 – Net foreign portfolio investments registered at the Bangko Sentral ng Pilipinas by five custodian banks shrank 63.2% to US$681.7 million as of the first week of June from US$1.8 billion a year ago. Gross portfolio investments inflows decreased 14.5% to US$2.8 billion from US$3.3 billion, while gross portfolio investments outflows increased 49.1% to US$2.1 billion from US$1.4 billion.

According to the BSP, US$2.0 billion of the registered portfolio investments went into the stock market, US$574.2 million into peso-denominated government securities, US$23.5 million into money market instruments, and US$1 million in bank deposits. Nearly 80.0% of registered investments came from the U.S., Singapore, and the United Kingdom. Some foreign investments went into telecommunications, property, food, beverage and tobacco, and banking stocks. Governor Tetangco pointed out there were less initial public offerings and a decrease in the volume of government securities issued this year compared to last year.

BSP Governor Amando Tetangco Jr. reported a 42% rise in capital outflows from divesting government securities and selling shares of stocks, amounting to US$870 million. Withdrawals of peso-denominated deposits, which represented proceeds from divested stocks and government securities, reached US$352.6 million.

PSE posts biggest single-day
drop in 7 years

23 May 2006 – The Philippine Stock Exchange index fell 93.62 points to 2,264.36, its sharpest drop in almost seven years. The PSE followed other Asian equities markets, which have been on the decline in recent days over fears of interest rate hikes by central banks and economic slowdowns abroad. Locally, the congressional hearing over the grant of 3G licenses by the National Telecommunications Commission also turned off investors.

Today, the PSEi lost 4.0%; China’s Shanghai composite, 3.2%; Japan’s Nikkei, 1.6%; Taipei, 1.4%; and South Korea, 0.6%. Losers outnumbered gainers by 100 to 7, while 38 issues remained unchanged.

Just last 8 May, the PSE went up 5.3%, gaining 131.64 points to 2,601.88. That was its highest single-day rise in close to seven years.

Senate to limit granting of
fiscal incentives

22 May 2006 – Senate Ways and Means Committee chairman Ralph Recto has announced that his committee will limit the granting of fiscal incentives to exporters. In a marathon public hearing on the proposed rationalization of fiscal incentives (Senate Bills 513, 798, 1104, 1328, 1332, 1839, and 3295), the Department of Trade and Industry said that it supports the removal of income tax holidays as well.

The government’s foregone revenues from the grant of tax holidays reached P27.1 billion in 2004 alone. Overall, the government lost P229.4 billion, P282.8 billion, and P299.9 billion in revenues from fiscal incentives in 2005, 2004, and 2003, respectively.

According to a study by the Department of Finance, net operating loss carryover and accelerated depreciation attract more investments. Senator Recto plans to grant NOLCO to investors locating their projects outside Central and Southern Luzon, Central Visayas, and Metro Manila.

Senators now favor the granting of nonfiscal incentives to attract investments. The proposed reform measure is expected to generate P40 billion more in revenues for the government. The House of Representatives submitted its counterpart measure, House Bill 3295, to the Senate last 20 January 2005.

Net FDIs rise 22% in the
first two months

10 May 2006 – Net foreign direct investments increased 22% to US$344 million in the first two months from US$282 million a year ago due to a 666% rise in net inflows of “other capital” to US$266 million from an outflow of US$47 million a year ago. The “other capital” account represents intercompany accounts between investee companies and their corresponding foreign direct investors.

Meanwhile, the Bangko Sentral reported a 79.9% drop in net inflows of equity capital to US$62 million from US$309 million. According to BSP, most of these went to the manufacturing and real estate sectors. Net reinvested earnings also decreased to US$16 million from US$20 million.

Net foreign buying of stocks up in Q1

17 April 2006 – Net foreign buying at the Philippine Stock Exchange rose 17.8% in the first quarter to P16.7 billion from P14.2 billion a year ago. While foreign buying grew 17.9% to P91.9 billion from P78.0 billion, foreign selling also increased at the same pace to P75.2 billion from P63.8 billion.

In March, foreign selling actually picked up 60.6% to P39.2 billion from P24.2 billion in February. Philippine Stock Exchange president and CEO Francis Lim attributed the increased selling by investors in March to “doubts about the stability of Mrs. Arroyo’s government.” He noted, however, that net foreign buying in the fourth and last weeks of March exceeded P1 billion a week.

Direct investments drop 69.4% in Q1

10 April 2006 – Direct investments approved by the Board of Investments and the Philippine Economic Zone Authority shrank 69.4% to P20.0 billion in the first quarter from P65.6 billion a year ago. PEZA-approved investments actually grew 3.9% to P14.5 billion (P10.1 billion by locators and P4.4 billion by developers) from P14.0 billion (P13.0 billion by locators and P955.4 million by developers). However, BOI-approved investments contracted 89.5% to P5.5 billion from P52.6 billion. The Department of Trade and Industry expects investments to pick up in the succeeding quarters.

PSE renames “Phisix” to “PSEi”

14 March 2006 – Starting 1 April, the composite index of the Philippine Stock Exchange will no longer be called “Phisix” but “PSEi.” The PSE Board also added three criteria to the existing four criteria in determining which stocks will be included in the 30-company shares index. At present, the PSE uses the following criteria: full market capitalization, liquidity, tradability, and sector representation. The additional yardsticks are free-float shares, free-float market capitalization, and volume turnover ratio. The PSE expects the new index formula to promote growth in the stock market and enhance the value of stocks. PSE president Francis Lim has scheduled a parallel run with the new standard for the last week of March.

BOI-approved direct investments, net foreign portfolio investments drop in first 2 months

6 March 2006 – The project cost of direct investments (both Filipino and foreign) approved by the Board of Investments fell 41.0% to P2.5 billion in the first two months of 2006 from P4.2 billion a year ago. On the other hand, the project cost of direct investments approved by the Philippine Economic Zone Authority grew 28.1% to P8.4 billion from P6.6 billion last year.

Meanwhile, the Bangko Sentral ng Pilipinas reported lower net foreign portfolio investments of US$398.3 million as of end-February from US$877.4 million a year ago. Inflows of foreign portfolio investments reached US$986.1 million, mostly in the stock market. The BSP attributed this to the implementation of the 12% reformed value-added tax, a successful initial public offering, an additional stock offering, credit outlook upgrades by Standard and Poor’s and Fitch Ratings, a lower inflation rate last January, and strong corporate earnings. But according to the BSP, political and security concerns tempered the rise of net portfolio investments during the last week of February. On the other hand, outflows of foreign portfolio investments reached US$587.8 million.

BSP projects US$971-million net FDI inflow in 2005

11 January 2006 – Net inflow of foreign direct investments from January to October 2005 reached US$863 million despite foreign and domestic pressures on the country’s business environment. Due mainly to higher placements and lower withdrawals, the figure is up 64.4% from the year-ago level of US$525 million and is even higher than the 2004 full-year figure of US$469 million. In a press statement, the Bangko Sentral ng Pilipinas projected that total net FDI inflow may have reached US$971 million by December 2005. In October, the net FDI flow expanded by a hefty 100% to US$102 million from only US$51 million a year ago.

PEZA-approved investments up 21.6%

27 December 2005 – Investments in state-owned economic zones and privately held industrial estates from January to November hit P49.9 billion. This figure is up 21.6% from P41.0 billion a year ago. The rise was due to approvals of about 300 projects, mostly on investments related to information technology. The projects are expected to generate direct employment for 65,376 workers this year from last year’s projected employment of 50,240. Companies locating inside ecozones and industrial estates will be entitled to fiscal and nonfiscal incentives, such as income tax holidays and duty-free importation of capital equipments.

RP tops in investor relations activities

16 December 2005 – The Washington D.C.–based Institute of International Finance recently ranked the Philippines’ investor relations program number one in its assessment of the investor relations activities of 30 emerging economies. The IIF is a global association of financial institutions whose members include most of the world’s largest commercial and investment banks, as well as a growing number of insurance companies and investment management firms.

In a report released on 8 December, the IIF also ranked the country as second only to Brazil in terms of combined investor relations and data transparency practices, besting China, Korea, Thailand, and Malaysia. According to Rene Pizarro, executive director of the Investor Relations Office of the Philippine government, the IIF’s report “was a validation of the government’s commitment to a transparent approach in communicating with investors about the fiscal and economic situation of the Philippines.” Pizarro said the benefits of this approach have supported a strong peso, increased investment, and improved the country’s cooperation with international credit rating agencies.

The Investor Relations Office is an agency created mainly to provide and support timely and accurate dissemination of information about the policy environment and performance of the country.

Foreign investments up 68.8% in
first 9 months

14 December 2005 – Net foreign direct investments from January to September this year jumped 68.8% to US$812 million from US$481 million a year ago. However, this is lower than the total net FDIs for the eight-month period ending August of US$929 million. The decline was due to a net outflow of US$87 million in September caused by large borrowings between investee companies and their foreign principals.

According to the latest report of the Bangko Sentral ng Pilipinas, the manufacturing sector attracted US$506 million in fresh capital during the period, while the real estate and service sectors received US$91 million and US$16 million, respectively. The bulk of FDIs came from investors based in the U.S. and Hong Kong.

Net foreign portfolio investments at US$2.1B as of early November

11 November 2005 – Net portfolio investments registered with the Bangko Sentral ng Pilipinas for the year ending 4 November resulted in a net inflow of US$2.1 billion. This level is 7.4 times larger than the year-ago figure of US$279.1 million and 4.2 times larger than the 2004 full-year figure of US$486.8 million. On a gross basis, investments during the period reached US$5.0 billion, almost three times more than the US$1.7-billion figure in 2004. However, 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 comparable period in 2004.

The bulk of registered foreign portfolio investments were in shares of stock listed with the Philippine Stock Exchange. The rest were placed in peso-denominated government securities, peso time deposits in banks, and money placements issued by the local private sector.

The central bank further reported that transactions for the week ending 4 November, which was shortened by a three-day holiday, posted a large net inflow of US$21.4 million. Optimism on the implementation of the expanded value-added tax law, the continued easing of world oil prices, and the appreciation of the peso, bolstered by substantial OFW remittances, boosted investor sentiment during the week. It must be noted, however, that these figures are different from foreign portfolio investments in the balance of payments, which represent actual flows during the period under review.

PSE adopts new industry
classification scheme

3 November 2005 – In response to the current trend towards sector-based investing, the board of the Philippine Stock Exchange recently approved a new industry classification scheme to accurately reflect the state of industries in the local equities market. The new scheme, which will be in effect beginning 1 December, will now focus on the core “business” of listed companies that generates the bulk of the companies’ revenue instead of the previous criteria that looked at the “primary purpose” of companies as stated in their articles of incorporation.

Under the new industry classification, listed companies will fall under the industrial sector, financial sector, property sector, services sector, mining and oil sector, or the newly created holding firms sector. What used to be the commercial-industrial sector was broken down into the industrial sector and the services sector. Other groupings were also renamed to conform to the Global Industry Classification Standards developed by index providers Morgan Stanley Capital International and Standard & Poor’s. PSE president Francis Lim noted that “the new industry classification scheme still remains in harmony with the Philippine Standard Industry Classification” and the revisions only “transform other industries into sectors to minimize excessive representation.”

The composition of the PSE Composite Index will also be changed with the inclusion of Banco de Oro Universal Bank, Manila Water Company, Philex Mining Corporation, Pilipino Telephone Corporation, and SM Investments. These companies will replace Ginebra San Miguel Inc., Ionics Circuits Inc., JG Summit Holdings, Music Corporation, and Philippine National Bank.

BOI- and PEZA-approved investments down 4.6% in first 8 months

24 October 2005 – Projects approved by the Board of Investments and the Philippine Economic Zone Authority shrank 4.6% in the first eight months to P145.6 billion from P152.6 billion a year ago. BOI and PEZA approved 365 projects from January to August.

For the month of August, however, BOI- and PEZA-approved investments grew 631.9% to P11.9 billion from P1.6 billion. Of this amount, P8.8 billion went into manufacturing, P1.2 billion into IT services, and P0.8 billion in community, social, and personal services. Foreign investments reached P9.5 billion, while local investments amounted to P2.4 billion.

Net FDIs rise 107% in first
seven months

11 October 2005 – Recent data by Bangko Sentral ng Pilipinas reveal the continued growth of the country’s net foreign direct investments. In January to July, net FDIs registered an increase of 107% to US$499 million from US$241 million a year ago. Net equity capital inflows rose 30.3% due to the combined effects of higher placements and lower withdrawals. Placements in the same period grew 14.4% to US$729 million from the year-ago level of US$456 million, while equity withdrawals dropped 25.4% to only US$135 million this year from US$181million last year.

Meanwhile, reinvested earnings dropped 92.5% as foreign investors recalled more direct investment ventures in the country. The central bank stressed, however, that the drop was due to the exclusion of reinvested earnings of enterprises that will be recorded only when their audited financial statements become available.

Net portfolio investments drop due to continued VAT suspension

3 October 2003 – More foreign portfolio investments left the country than stayed in the week ending September 23 after the Supreme Court delayed action on the lifting of the temporary restraining order on the expanded value-added tax law. Placements made by nonresidents in domestic financial instruments was at negative US$5 million in the week mentioned, bringing the sum of foreign portfolio investments from January to the week ending 23 September to US$2.0 billion. Despite the drop, this year’s level is still higher than last year’s US$192 million for the same period.

FDIs rise 46.9% in Q2, but drop 65.8% for H1

29 September 2005 – Total approved foreign direct investments in the second quarter of 2005 rose 46.9%, posting P11.7 billion worth of approvals from P8 billion in the same period last year. The growth was primarily due to the sustained inflow of commitments to the manufacturing sector, which registered about P9.3 billion in total pledges in the quarter from P3.7 billion a year ago. The sector’s 150.7% growth was boosted by commitments involving petrochemical products, which comprised about half of the project cost devoted to the manufacturing sector.

The leading source of FDIs in the second quarter was the Netherlands, with P4.0 billion worth of commitments. This is five times higher than its pledge a year ago. Japan, last year’s top source, however, declined 26.6% to P3.1 billion from P4.2 billion during the second quarter in 2004. Meanwhile, investment pledges from the U.S. increased seven times to P1.8 billion from a considerably lower figure of P251 million a year ago. Investment commitments by foreign nationals comprised about 19.5% of total approved investments. The rest were committed by Filipinos in wholly and partially owned companies, amounting to P48.6 billion.

On a semestral basis, however, approved FDIs fell 65.8% to P43.3 billion from a hefty P126.6 billion last year. The drop was largely due to decreases in commitments this year by the Koreans (–90.6%), the Swiss at (–99.2%), and the Singaporeans (–70.9%). This translated to significant drops in investment pledges in some of last year’s attractive industries. In particular, commitments in the construction sector declined 98.2%, while those in the finance and real estate industry dropped 83.6%. The services industry, the third highest gainer in 2004, also fell 44.8%.

On the whole, approved investments by both residents and nonresidents were expected to generate about 26,258 jobs in the second quarter and about 47,135 for the whole semester.

ASEAN ministers, FTSE launch new trading indices

22 September 2005 – Two new indices that allow investors to gain exposure to the fast-growing ASEAN economy was created during the ASEAN Finance Ministers’ Investors’ Seminar in London yesterday. The project to create indices for trading and benchmarking of financial products in the ASEAN region was initiated in partnership with the Financial Times Stock Exchange Group and is the first cooperative effort between five ASEAN exchanges, namely, Bursa Malaysia, Jakarta Stock Exchange, the Philippine Stock Exchange, Singapore Exchange, and The Stock Exchange of Thailand.

The FTSE/ASEAN Index has 180 constituents and will be the benchmark for the five markets, while the FTSE/ASEAN 40 Index is a tradable index consisting of 40 securities suitable for exchange traded funds, derivatives, and other tradable products. The indices are free-float adjusted, based on international standards, and the first to be created for the ASEAN equity markets. They will be managed using a system that “accurately reflects the investability of a company, without subjecting investors to unnecessary rebalancing and transaction costs.”

But why create tradable and benchmarking indices for ASEAN? The exchanges said in a joint statement that it would help “increase the visibility of the ASEAN region to domestic and international investors.” The region already boasts of more than 2,300 companies with total market capitalization exceeding US$600 billion. In 2004, ASEAN GDP growth was at 5.9%, far outstripping the U.S. and EU-25. With this new effort, the region is set to become even more competitive with increasing business and investment opportunities.

However, whether this will bring the Philippines more business and investment opportunities remains to be seen. The country is represented by only 12 out of 180 securities in the FTSE/ASEAN Index and by just one security, the Philippine Long Distance Telephono Co., in the FTSE/ASEAN 40 Index. Moreover, the indices, which are denominated in dollars, are calculated using real-time spot rates, hence, any foreign exchange movement will affect performance.

PSE-listed firms post 27% income rise in first half

19 September 2005 – Contrary to expectations of declines in corporate performance in the first half due to continuing political uncertainties and significant economic challenges, the net earnings of companies listed at the Philippine Stock Exchange grew 27.3%. The increase to P73.84 billion from only P58 billion in 2004 reaffirmed the resilient and robust foundation of the country’s equities market despite structural impediments and speculations over the political future of President Gloria Macapagal-Arroyo. PSE president and chief executive officer Francis Lim also attributed the double-digit rise to the passage of the expanded value-added tax law, the 4.6% economic growth in the first quarter, and the manageable inflation rate and accommodative monetary policy.

Leading the list of profitable companies in the first half was Philippine Long Distance Telephone Co., which saw its first-half profits rise by 35.1%. In the second spot was Ayala Corp., whose profits climbed by 54.5%. Pilipino Telephone Corp. and consistent placer Bank of the Philippine Islands came in third and fourth, respectively. Piltel’s profits grew almost seven-fold while BPI’s income was up this year by 22.6%. The 30 companies comprising the PSE composite index reported a combined net income of P54.7 billion, representing 74.2% of the total net profit of all listed firms.

Net FDIs still upbeat in first half

16 September 2005 – Net foreign direct investments into the country rose by 191% to US$495 million in the first semester from US$170 million a year ago, according to the Bangko Sentral ng Pilipinas. The increase was posted despite political uncertainties in the second quarter over allegations that President Gloria Macapagal-Arroyo cheated in last year’s election. Net equity capital rose 35.3% to US$560 million as new placements increased 16.4% while withdrawals declined 27.5%. Fresh capital—the bulk of which came from Hong Kong and Japan—went to the manufacturing, real estate, financial, and services sectors, particularly into business process outsourcing. Equity withdrawals, which reflects funds recalled by investors to their home countries, dropped to US$129 million from US$178 million last year.

Meanwhile, net reinvested earnings dropped 96.8% from US$62 million to only US$2 million this year. This means that only a few investors opted to retain or rollover some of their earnings in the domestic economy. However, the 2005 reinvested earnings data include only those earned by local banks and do not yet cover those of enterprises. Earnings of these companies will only be recorded when their audited financial statements become available, the BSP clarified.

Recently, the World Bank also released its latest survey on the cost of doing business in the country. The survey, however, revealed a very different picture of the country’s investment climate as it ranked the Philippines as one of East Asia’s least friendly regulatory environments for doing business. The country ranked low in most of the survey’s 10 investment indicators, which means that it has not been aggressive enough in courting entrepreneurs with far-reaching reforms that will streamline business regulations and taxes. Nevertheless, World Bank country director for the Philippines Joachim von Amsberg lauded the country’s excellent pool of “highly educated and entrepreneurial people and rich natural resources.” He said the country has the potential to be an “incredibly attractive place for both international and domestic investments into businesses that generate new jobs and income.”

RP ranks low in World Bank survey
on doing business

14 September 2005 – Where is doing business easy? Definitely not in the Philippines according to the World Bank’s latest survey, “Doing Business in 2006: Creating Jobs,” in which the country ranked 113th of 155 countries in terms of ease in doing business.

Launching a business here takes about 48 days, unlike in Organisation for Economic Co-operation and Development member-countries where it only takes 19 days on average to register a new firm. Entrepreneurs have to go through 11 procedures at a cost equal to about 20.3% of the country’s per capita gross national income. Moreover, it usually takes about 23 steps and 197 days to complete licensing and permit requirements. A case in point is the process of obtaining construction licenses. The procedures involved in getting all the necessary licenses and permits, completing all the required notifications and inspections, and submitting the relevant documents to authorities are so burdensome that construction has moved to the informal economy. The report estimates that about 57% of new construction in the country are illegal.

The country also ranked poorly at 92nd in property registration. Securing rights to properties strengthens incentives to invest and facilitates trade, but complex and bureaucratic processes are hindering this process. Businessmen have to hurdle 8 steps, much longer than the regional average, and wait for 33 days before a property is registered. Protecting investors against self-dealing—the use of corporate assets for personal gain—is also necessary for equity markets to develop, but the country ranked only 132rd in this category. This category measures the strength of minority shareholder protection against directors’ misuse of corporate assets for personal gain. Investor protection is important because when investors see a high risk of expropriation, they will not invest or will pull out their investments.

The Philippines also ranked 80th in terms of paying taxes, 33rd in the costs and procedures involved in cross-border trading, and 89th in enforcing commercial contracts. In terms of the time and cost required to resolve bankruptcies or in winding up businesses, the country was one of the worst at 132nd. Recovery rates in terms of how many cents on the dollar claimants recover from insolvent firms is only 4.11%, compared to the regional average of 26.4% and OECD countries’ average of 73.5%.

Despite the negative investment picture, the country still fared better than Indonesia, Cambodia, and India, which ranked 115th, 133rd, and 166th, respectively. The World Bank also clarified that “rankings on the ease of doing business do not really tell the whole story” as the indicators are limited in scope. The survey does not account for a country’s proximity to large markets, quality of infrastructure services (other than services related to trading across borders), macroeconomic conditions, and several other useful indicators. Moreover, a high ranking on the ease of doing business “does not mean that the government has created a regulatory environment conducive to the operation of business” as they often proxy for broader reforms.

Impeachment scares
foreign fund investors

5 September 2005 – Net portfolio investments fell significantly beginning mid-August until August 26 as the House of Representatives deliberated on the impeachment complaints filed against President Gloria Macapagal-Arroyo. In the week ending 19 August, portfolio net inflows reached US$4.3 million only from about US$20 million during the first half of the month. Meanwhile, foreign funds that flow into the country for the week ending 26 August registered US$61.7 million, a slight drop from the previous week’s US$ 66.6 million. This, however, was 50% lower than the first week’s US$129 million, creating an impression that the impeachment deliberations scared investors away. Fund outflows for the week ending 26 August reached US$53.2 million, leaving a net portfolio total of only U$$8.5 million.

The skyrocketing prices of crude oil, burgeoning fiscal problems, and slower agricultural output also created a gloomy environment. Concerns that the implementation of the expanded value-added tax law might be stalled also added to the worries. In addition, the 7.4% drop in excise tax collection in the first half of 2005 from P11.3 billion a year ago raised doubts regarding the government’s ability to meet its revenue targets for the year. Excise tax collection dropped despite the passage of the sin tax law in December 2004.

On the whole, however, the country posted an investment surplus worth US$1.991 billion this year up to the week ending 26 August. This is in stark contrast to the year-ago level of negative US$1.8 billion, which means that more funds were recalled than invested in the market in 2004.

The Bangko Sentral ng Pilipinas expects net foreign portfolio investments for the year to go as high as US$1.7 million.

Foreign investments up 172%

22 August 2005 – Contrary to earlier reports of a 50% slump in foreign direct investments in January to May, inflows to the country for the period actually rose 172.5%. Bangko Sentral ng Pilipinas issued the corrections explaining that reporters have mistakenly used FDIs registered with the BSP to mean actual FDIs into the country.

BSP officials said that registration records do not represent actual flows because “registration is not mandatory” and “there is currently no mandatory period within which to register foreign investments.” The absence of a compulsory registration period creates a “considerable lag between the inflow of investments and the registration with the BSP” making registered investments an inaccurate FDI indicator. BSP added that registration of investments is required only “where capital repatriation and remittance of earnings are to be serviced with foreign exchange from the banking system.” BSP stressed that the true measure of FDI flows should be taken from the BSP’s balance of payment statistics and not from data on investments registered with the BSP.

Previous news accounts on FDIs described the level for the first five months to be 50% lower than last year’s figure of US$470 million due to the use of a different benchmark. Preliminary estimates by the BSP using the BOP concept, however, revealed a significant growth of 172.5% to US$417 million from US$153 million in 2004. FDI components, such as net equity capital, reinvested earnings, and other capital, all posted gains due to hefty investments from Hong Kong and Japan. Details of the five-month FDI standing, however, were not yet disclosed as the full BOP report for the first semester of 2005 will only be released by September 2005.

Stock market rises 21.8% in H1

12 August 2005 – The local stock market managed to sustain its vigor despite political and economic uncertainties as trading volume climbed 21.8% in the first half of 2005. Philippine Stock Exchange president and chief executive officer Francis Lim attributed the market’s growth to the passage of the expanded value-added tax law, good corporate earnings, a more stable peso and accommodative monetary policy, and the listing of Manila Water Company and SM Investments Corporation.

The stock market’s encouraging performance can also be attributed to the mining sector’s impressive growth of 609.6% as it cornered 53.6% of total trading volume. The banking and financial sector also posted a remarkable improvement of 431.9%, although it only contributed 0.1% of the entire number of shares traded.

Trading value was also exceptional in the first half, surging 151.9% to P223.2 billion from P88.6 billion a year ago. In terms of growth rates, the mining sector jumped 5,617.4% to P12.9 billion from last year’s P225.1 million, retaining its position as the best-performing sector, followed by the oil sector, which leaped 913.3%, and the commercial and industrial sector, which rose 163.6%. Foreign investors still account for more than 50% of market turnover, indicating that these foreign investors are paying more attention to economic fundamentals than to the country’s political troubles.

Lim added, however, that the first semester’s performance was rather tempered. Political issues, uncertainty in the country’s creditworthiness, the rising prices of crude oil, and the Supreme Court’s temporary restraining order against the EVAT law all softened the market’s performance in the latter part of the semester and thwarted the Phisix’s takeoff beyond the 2100 mark.

Net portfolio investments rise amidst political uncertainties

2 August 2005 - Foreign portfolio inflows from January to 22 July reached US$4.0 billion as against total outflows of US$2.1 billion, resulting in a net inflow of US$1.9 billion in the period mentioned. This is a substantial improvement from last year’s net inflow of US$140.4 million, according to the Bangko Sentral ng Pilipinas. The rise defied expectations of a decline in foreign short-term investments in the first half of the year due to continuing political instability. But analysts say it is too early predict whether the trend will persist until the end of the year as portfolio investments are short-term and highly volatile in nature. The bulk of this year’s inflows went into PSE-listed securities at US$2.8 billion, which comprises 70% of the total, followed by government securities at US$1.2 billion.

From 1 July to 22 July, inflows reached US$397.3 million while outflows stood at US$346.4 million. This resulted in a net inflow of US$50.9 million for the period, topping last year’s net outflow of US$13.0 billion. According to the Philippine Stock Exchange, investors have cautiously returned to the market and sent the local equities market to a three-week high as fears of political unrest softened. Investors, likewise, lauded the continued growth of overseas Filipino workers’ remittances in May and were optimistic about high corporate earnings in the second quarter. Most of the sectors recorded gains in the week ending 22 July, headed by the property sector and the commercial and industrial sector, which gained 35 and 3 percentage points, respectively. Investors retreated to the sidelines earlier in the month and began stepping up trade only in the week ending 15 July.

June portfolio investments
recover after fall

11 July 2005 – Portfolio investments fell sharply in the week ending 24 June amid political uncertainties but immediately recovered the following week ending 1 July.

In the week ending 24 June, US$81.8 million entered the country but US$146.6 million also left the system, resulting in a negative net figure of US$64.8 million. Observers see this as foreign investors’ mild reaction to the wiretapping scandal involving President Gloria Macapagal-Arroyo that started early June and the ongoing investigation on jueteng to which her family has been linked. However, investment flows returned to normal after Arroyo’s televised admission on 27 June that she had indeed spoken to a Commission on Elections official during last year’s election period. For the week ending 1 July, portfolio investment inflows amounted to US$126.3 million versus investment recalls amounting to US$39.2 million only.

Net portfolio investments for the six-month period ending 1 July was 12.9 times higher than last year’s. According to BSP Governor Amando M. Tetangco Jr., this indicates that foreign investors have remained confident about the country’s economic prospects despite
recent political events.

Domestic investments fail to lift Q1 approved investments

6 July 2005 – Total approved foreign direct investments for the first quarter of 2005 contracted by 73.4%, posting only P31.5 billion compared to last year’s P118.6 billion. Approvals of Filipino investments, on the other hand, grew by a hefty 145.5% to P34.6 billion from last year’s P14.1 billion. However, this could not offset the big contraction in foreign commitments.

Foreign nationals accounted for only 52.3% of approved investments in the first quarter this year, compared to 89.4% last year. This shrunk the cumulative combined commitments for foreign and Filipino nationals this year by 50.2% to P66.1 billion from P132.7 billion in 2004

The continuous investment commitments to the manufacturing sector and the noticeable investor interest in electricity sustained this year’s inflow of foreign direct investments. The investment approvals in these sectors accounted for 92.3% of total FDIs in the first quarter. Meanwhile, infusion to the service sector slowed down by 66.2% to P844.9 million from last year’s P2.5 billion.

The top sources of FDI commitments for the first quarter were Japan and Korea, whose combined potential investments amounted to P23.8 billion. This is 75% of the total FDI approvals in the quarter. Other significant contributors are the Netherlands, the U.S., and Thailand.

The approved investments are expected to generate 16,415 jobs this year, down by 17.4% from the 19,873 expected jobs in the same period last year. Sixty-seven percent of this is expected to come from PEZA-approved investment projects.

Stock market surges 162%
for first 5 months

24 June 2005 – Trading value in the Philippine Stock Exchange (PSE) for January to May ballooned by 162% to P196.5 million from P74.9 billion a year ago. This is already 95% of the P206.6-billion full-year value posted in 2004. PSE president and CEO Francis Lim attributes the liquid performance of the market to “the country’s relatively rosy macroeconomic indicators, such as the GDP growth for sixth straight years, rise in private consumption, increase in exports for the past four years, and the implementation of key fiscal measures.”

San Miguel Corporation (SMC) topped the list of stocks in terms of value turnover, owing to the food conglomerate’s aggressive acquisition and expansion activities this year. From 10th place last year, SMC rose to number 1 out of 237 listed companies. Rounding up the list were the Philippine Long Distance Telephone Company, SM Investments Corporation, Bank of the Philippine Islands, Globe Telecom, Ayala Land, Manila Water Company, Semirara Mining Corporation, SM Prime Holdings, and Ayala Corporation.

The mining industry registered the highest growth in value turnover, skyrocketing by 8,340.3% to P12 billion for the first five months from a measly P0.1 billion in the same period last year. The mining sector clearly benefited from the December 2004 Supreme Court ruling that upheld the constitutionality of the Philippine Mining Act of 1995 and the financial and technical assistance agreements between the government and foreign mining firms.

BOI investments drop as of May

14 June 2005 – New projects approved by the Board of Investments in the first five months of 2005 rose to 77 from 63 a year ago. But the project cost dropped 21.4% to P90.7 billion from P115.4 billion last year. Nevertheless, Filipino equity investments increased to P70.8 billion from P17.8 billion. By sector, manufacturing investments likewise expanded to P38.3 billion from P2.1 billion.

A year ago, a single project from a Nauru-registered firm already cost P96.6 billion.