• PH net liability up at $51B on share price surge

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    pgnetThe Philippines’ international investment position (IIP)—the value of the economy’s financial claims and liabilities with the rest of the world—showed a net liability of $51.4 billion in the third quarter of 2014, up 2 percent from the previous quarter, data from the central bank showed. The IIP is a companion framework to the balance of payments (BOP) statistics.

    The economy, the Bangko Sentral ng Pilipinas (BSP) said, owed more to the world during the period because of the surge in the prices of shares of stocks held by foreigners and the revaluation of its own international reserves. Its gold reserves were revalued to reflect lower gold prices.

    The BSP said the country’s net liability rose by $1 billion from the second-quarter 2014 level of $50.4 billion. As of end-December 2013, the country had a lower net liability of $40.7 billion.

    Based on BSP data, the value of shares of stocks owned by foreigners surged to $51.1 billion or Php2.25 trillion out of the total liabilities of $191.3 billion as of the third quarter of last year.

    The September total represented an increase of $1.7 billion from $189.6 billion as of end-June 2014. The bulk of the increase resulted from higher share prices.

    On the other hand, total outstanding external financial assets reached $139.8 billion, up by $600 million from the previous quarter’s level of $139.2 billion, according to the BSP data.

    The central bank noted that the increase in net asset position because of transactions during the third quarter of 2014 was more than offset by the negative revaluation adjustments on assets (particularly on the BSP’s international reserves) and the positive revaluation adjustments on liabilities (as domestic assets consisting mostly of equity securities appreciated in value).

    The BSP said this is on the back of the continued confidence of foreign investors in the country’s strong macroeconomic fundamentals, including the credit rating upgrade by Japan-based Rating and Investment Information, Inc. in July 2014.

    “This reflected the improved performance of the domestic equities market, contributing to the appreciation of the value of domestic assets that were held by non-residents,” it stated.

    Compared with the BOP, which is a statistical statement that records the country’s transactions or flows with the rest of the world for a given period, the IIP summarizes the country’s stock of financial claims on and financial liabilities to the rest of the world.

    Similar to the BOP’s financial account, the assets and liabilities in the IIP are classified as direct investments, portfolio investments, financial derivatives, and other investments.

    BSP maintains asset position

    The BSP continued to maintain a net external asset position as of end-September 2014 while the rest of the sectors like deposit-taking corporations or banks, general government, and other sectors posted net external liability positions.

    The central bank held the largest share of residents’ total claims on the rest of the world, amounting to $80 billion or 57.2 percent during the period.

    The other sectors accounted for 28.8 percent or $40.2 billion of total outstanding financial assets while banks held the remaining $19.6 billion 14 percent.

    More than half or 56.9 percent of residents’ total holdings of external assets as of end-September were mostly reserve assets held by the BSP amounting to $80 billion.

    Investments in debt instruments accounted for 13.7 percent of total external financial assets while residents’ deposits abroad (9.7 percent), investments in equity capital (8.9 percent), and holdings of debt securities (5.9 percent) combined for 24.5 percent of the total.

    The other sectors continued to hold the majority of residents’ total liabilities to non-residents, with 65.1 percent share as of the third quarter of 2014.

    The sector’s outstanding liabilities, at $124.5 billion as of end-September, were largely in the form of foreign direct investments (47.7 percent) and portfolio investments (39.4 percent).

    The general government recorded $37.4 billion external liabilities during the three-month period, equivalent to 19.5 percent of total liabilities to non-residents.

    Total external liabilities of banks, amounting to $27.9 billion, accounted for 14.6 percent of the country’s total external liabilities as of end-September 2014.

    Lastly, the central bank said outstanding financial liabilities of the domestic economy to the rest of the world consisted largely of non-residents’ holdings of equity securities ($51.1 billion) and equity capital ($47.1 billion) equivalent to 26.7 and 24.6 percent, respectively.

    Foreign loans accounted for 20.7 percent ($39.6 billion) while debt securities—bonds and notes—issued by the national government and other sectors comprised 16 percent ($30.5 billion) of these foreign obligations, it added.

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