PH net liability position up 39.1 percent to $34.1 billion

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The Philippines’ International Investment Position (IIP) declined as the country’s net liability position grew by 39.1 percent to reach $34.1 billion at end-2012, according
to the preliminary data released by the Bangko Sentral ng Pilipinas (BSP) on Tuesday.

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The IIP summarizes the country’s stock of financial claims on and financial liabilities to the rest of the world as of a specific reporting period.

The BSP stated that the end-2012’s net liability position was higher than the revised end-2011 level of $24.5 billion, “on the back of robust inflows in the financial account as investors trooped toward emerging markets, including the Philippines.”

“This developed as the growth in the country’s total external financial liabilities exceeded the growth of total external financial assets,” it added.

Meanwhile, total external financial assets increased year-on-year by 12.4 percent to $119.7 billion, while total external financial liabilities increased by 17.4 percent to reach $153.8 billion.

The central bank said that sound macroeconomic fundamentals, highlighted by positive credit rating actions from Moody’s and Standard and Poor’s, boosted investors’ confidence in the economy, which was reflected in the appreciable increases in portfolio, direct and other investment liabilities.

“Amid economic uncertainties across Europe and sub-par economic growth in the US, foreign investors have been attracted to emerging markets as they seek higher-yielding investments,” it added.

As a result, the BSP noted that the Philippine Stock Exchange index (PSEi) gained 33 percent and closed at 5,812.73 points at end-2012, while the country’s favorable external payments dynamics led to the Philippine peso appreciation against the US dollar by 6.6 percent, closing at P41.19 per dollar at end-2012.

“These developments pushed the stock of liabilities upward, particularly investments in portfolio equity securities,” it added.

The central bank said that about 72 percent of the increase in equity securities held by nonresidents was due to changes in the market prices of securities, around 13 percent was attributed to exchange rate fluctuations, and the remaining 15 percent was due to transactions that materialized over the 12-month period.

Increased appetite
For its part, the Department of Finance said that the decline in IIP position because of higher inflows into both equity and debt securities demonstrate the increasing appetite for Philippine issued securities.

“We welcome these inflows which differentiate the Philippines from some of our peers and affirm strengthened fundamentals and sustained high growth trajectory,” Finance Secretary Cesar Purisima said.

On the other hand, across sectors, only the BSP recorded a net external asset position at end-2012 as it continued to hold the largest financial claims on the rest of the world amounting to $83.9 billion, or 70.1 percent at end-2012.

The other sectors accounted for $21.9 billion, or 18.3 percent, mainly in the form of residents’ equity capital investments and deposits in banks abroad.

The remaining $13.9 billion, or 11.6 percent was held by deposit-taking corporations, primarily in the form of placements in debt securities, while the general government maintained its total external financial asset holdings at nil.

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