It’s wait and see for investors

MANILA, Philippines – Foreign investors have adopted a wait-and-see attitude, putting on hold or temporarily withdrawing their investments in the Philippines due to jitters over today’s elections, according to Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo.

“We continue to see inflows from the external markets. Perhaps if there will be – we don’t have the numbers yet – it is because of election jitters,” Guinigundo said.

He pointed out that foreign investors could have adopted a wait-and-see attitude because of the uncertainties brought about by the May 10 elections.

Guinigundo said the jitters could have forced investors in the financial and equities markets to temporarily pull out their investments in the Philippines.

“When I say jitters there could either be just some withdrawals but we don’t expect those withdrawals to be large. There could also be a moderation in capital inflows, so if you are seeing $100 million probably you could be seeing $95 million or $90 million,” he added.

Latest data from the BSP showed that foreign direct investment (FDI) inflows plunged by 74 percent to $101 million in January from $393 million registered in the same month last year due to lower equity placements and higher withdrawals.

Monetary authorities pointed out that a large inflow was booked in January of 2009 due to the investment made by China’s largest electricity provider State Grid Corp. and Monte Oro Grid Resources Corp. in state-owned National Transmission Corp. (Transco) that bagged a $3.95-billion concession contract.

The consortium made cash payment of $987.5 million representing 25 percent of the total contract in January last year.

The BSP said equity capital posted a net outflow of $27 million last January, a complete reversal of the $417 million inflow posted in the same month last year. Equity placements plunged 96 percent to $17 million from $423 million while equity withdrawals jumped by 633 percent to $44 million from $6 million.

The BSP reported that reinvested earnings surged by 177 percent to a net inflow of $27 million in January from a net outflow of $35 million in the same month last year due to better-than-expected performance of local companies last year.

FDI inflows went up by 26.2 percent or $404 million to $1.95 billion last year from $1.54 billion in 2008 on the back of strong equity inflows as investors continued to plough back earnings to the country in recognition of the resilient domestic economy.

Likewise, foreign portfolio investments or “hot money” that flowed in the country surged by 602 percent to $384.75 million in the first quarter of the year from $54.78 million registered in the first quarter last year.

Inflows went up by 31.6 percent to $1.656 billion in the first three months of the year from $1.258 billion in the same period last year. Major sources that accounted for about 83 percent of the total portfolio investments in January to March included the United Kingdom, the US, Singapore, Malaysia, and Luxemburg.

On the other hand, gross foreign portfolio investment outflows inched up by 5.65 percent to $1.271 billion in the first quarter of the year from $1.203 billion in the same period last year due to withdrawals from interim peso deposits.

The Philippines shrugged off the global recession and posted a portfolio investment net inflow of $388.02 million in 2009, a complete reversal of the $1.784 billion outflow posted in 2008.

BSP data showed that inflows amounted to $6.335 billion last year or 23.8 percent lower than the $8.321 billion inflows registered in 2008 while outflows fell by 41 percent to $5.947 billion from $10.105 billion. –Lawrence Agcaoili (The Philippine Star)