Central Bank of Philippines : Foreign Portfolio Investments Post Net Outflows for 2015

01.14.2016

Foreign portfolio investment recorded net outflows of US$600 million in 2015, almost twice the US$310 million figure recorded a year earlier. While net cumulative inflows reached US$1.8 billion during the first two (2) months of 2015, these inflows were fully offset by net outflows in the succeeding months (except for the small net inflow of US$28 million in October), due mainly to profit taking in the local stock market, as well as concerns on the then imminent interest rates lift-off in the United States and slowdown of the Chinese economy.

Registered foreign portfolio investments for 2015 aggregated US$19.9 billion or 8.6 percent lower than the US$21.8 billion level the previous year. On a monthly basis, inflows ranged from US$1.1 billion (November) to US$2.5 billion (February). The highest inflows were recorded during the first quarter of the year (aggregate of US$6.8 billion or 34.3 percent of total for the year) which may be attributed to investor optimism arising from full year (2014) positive corporate earnings and upgraded growth outlook for the country by the International Monetary Fund, coupled with higher investments in PSE-listed shares due to: (i) a top-up offering of a property corporation's shares; and (ii) sale of a universal bank's and holding firms' shares.

Outflows of US$20.5 billion were likewise lower compared to US$22.1 billion a year ago when investors reacted to the tapering of the quantitative easing program of the United States. The bulk (US$18.6 billion or 90.5 percent of total) of outflows represented withdrawals from interim Peso deposits, which were for the following: (a) capital repatriation - US$14.7 billion from PSE-listed securities, US$3.4 billion from Peso government securities (GS), and US$51 million from Peso time deposits (TD); and (b) remittance of earnings - US$395 million from PSE-listed securities, US$78 million from Peso GS, and less than US$1 million from Peso TD.

Registered portfolio investments were mostly in PSE-listed securities (77.5 percent) and Peso GS (21.7 percent).

Transactions resulted in net outflows for PSE-listed securities (US$650 million) and other peso debt instruments (US$40 million), while net inflows were realized for other instruments (Peso TD - US$52 million; Peso GS - US$25 million; and unit investment trust funds - US$13 million).

The United Kingdom, the United States, Singapore, Luxembourg, and Hong Kong were the top five (5) investor countries during the year, with combined share to total of 79.6 percent, while the United States continued to be the main destination of outflows, receiving 79.7 percent of total.

Registration of inward foreign investments with the Bangko Sentral ng Pilipinas (BSP) is voluntary under the liberalized rules on foreign exchange transactions. The issuance of a BSP registration document entitles the investor or his representative to buy foreign exchange from authorized agent banks and/or their subsidiary/affiliate foreign exchange corporations for repatriation of capital and remittance of earnings that accrue on the registered investment. Without such registration, the foreign investor can still repatriate capital and remit earnings on his investment but the foreign exchange will have to be sourced outside the banking system.

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