• ECONOMIC and banking ANALYSTS:

    Surge in July net FDI shows PH still attractive

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    NET inflows of foreign direct investment (FDI) rebounded in July from a year earlier on higher intercompany borrowings, an indication that the country remains attractive for investors, according to analysts.

    The Bangko Sentral ng Pilipinas (BSP) reported Monday that net FDI rose 7 percent to $503 million from $470 million a year earlier.

    In the first seven months of the year, FDI surged by 79.1 percent to $4.69 billion from $2.62 billion a year earlier.

    “Investments in debt instruments grew by 79.4 percent to $417 million from $232 million in the comparable period last year,” the BSP said in a statement.

    However, equity placements dropped 74.6 percent to $46 million from $180 million a year earlier.

    The bulk of equity capital investments for the month came from Germany, the United States, Singapore, Japan, and Korea, and was channeled mainly to real estate, wholesale and retail trade, manufacturing, financial and insurance, and construction activities.

    In January to July, net equity placements stood at $1.65 billion, up from $1.06 billion a year earlier.
    Equity capital placements came primarily from Japan, Singapore, Hong Kong, the United States, and Taiwan.
    These were channeled to financial and insurance, real estate, manufacturing, construction, and accommodation and food service activities.

    Equity and investment fund share placements also fell by 63.6 percent at $86 million in July from $238 million.
    Reinvested earnings declined by 19.5 percent year-on-year to $63 million from $79 million, and caused a 3.9 percent drop in reinvestments at $446 million in January to July from $464 million.

    “As far as FDI is concerned, for the longer-term, we are pretty optimistic about the numbers,” said Gundy Cahyadi, economist at Singapore-based DBS.

    Cahyadi noted the attraction toward the economy has been pretty strong in recent years, and much will depend on how the government goes about liberalizing industries.

    “[B]ut clearly, the huge growth potential is attractive for foreign investors. Certainly, sentiment may get affected by political factors,” he said.

    Moody’s Analytics economist Jack Chambers said the FDI data reaffirms the view that the Philippines remains an attractive destination for foreign investors.

    “The strength in intercompany borrowing is a sign that foreign firms are also positive about the Philippines, future economic prospects,” he said.

    It also suggests that President Rodrigo Duterte’s comments about other countries did not really have an appreciable effect on FDI, Chambers added.

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