Foreign portfolio investment transactions yield net outflows for 2019

Transactions on BSP-registered foreign portfolio investments (FPIs)a for 2019 yielded net outflows of US$1.9 billion as a result of the US$18.5 billion outflows and US$16.6 billion inflows for the year. The net outflows of US$1.9 billion may be broken down to net outflows in the following instruments: Philippine Stock Exchange (PSE)-listed shares (US$1.7 billion); Peso government securities (GS) (US$228 million); and other portfolio instrumentsb (US$22 million).

Recorded outflows (US$18.5 billion) from BSP-registered FPIs for 2019 were higher compared to US$14.8 billion the previous year (by 24.8 percent or US$3.7 billion). Majority (or 97.1 percent) of these outflows represented capital repatriation while the remaining 2.9 percent pertained to remittance of earnings. The United States (US) received 75.1 percent of total outflows.

Similarly, BSP-registered FPIs for 2019 aggregating US$16.6 billion, reflected a 3.5 percent increase (or by US$569 million) compared to the US$16.0 billion level in 2018. These FPIs were predominantly securities listed in the PSE (77.7 percent, mainly investment in holding firms, property companies, banks, food, beverage, and tobacco firms, and retail companies), with the balance invested in Peso GS (22.3 percent) and other portfolio instruments (less than 1.0 percent). The United Kingdom, the US, Singapore, Malaysia, and Hong Kong were the top five (5) investor countries during the year, with combined share to total of 74.3 percent.

Developments for the year included: (i) ongoing trade tension between the US and China; (ii) passage of the rice tariffication law; (iii) the holding of the country's mid-term elections; (iv) easing domestic inflation; (v) heightened protests in Hong Kong; (vi) attacks on Saudi Aramco's oil facilities in Saudi Arabia which triggered the largest recent jump in oil prices; (vii) BSP's decision to reduce the reserve requirement ratio for universal/commercial and thrift banks; (viii) the rebalancing of the Morgan Stanley Capital International Philippines Index to reflect its new weightings; (ix) President Duterte's strong views on the alleged onerous provisions of Maynilad Water Services, Inc. and Manila Water Co., Inc.'s concession agreements; and (x) the US House of Representatives vote to impeach President Trump.

In contrast to 2019, registered FPI transactions for 2018 yielded net inflows of US$1.2 billion. This is mainly attributed to a large investment in a holding company registered in 2018 accompanied by investor reaction to the passage of the first phase of the government's tax reform program.

Transactions during the first quarter of 2019 yielded net inflows of US$363 million, while all other quarters resulted in net outflows (second - US$1.1 billion; third - US$608 million; and fourth - US$571 million); some developments for the second quarter of the year included: (i) the delayed approval of the 2019 national government budget; (ii) investor reaction to the April earthquake that jolted parts of Luzon and Visayas; and (iii) the holding of the country's midterm elections. It may be noted that quarterly transactions in 2018 recorded net inflows for the first (US$766 million) and fourth quarters (US$1.0 billion), while net outflows were recorded for the second (US$443 million) and third quarter (US$161 million).

Registration of inward foreign investments with the Bangko Sentral ng Pilipinas (BSP) is optional 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.

a Refer to inward foreign investments in PSE-listed securities (PSE); Peso-denominated government securities (GS); Peso time deposits (PTDs) with banks with minimum tenor of 90 days; other Peso debt instruments (OPDIs); unit investment trust funds (UITFs); and other portfolio investments such as Exchange Traded Funds (ETFs) and Philippine Depositary Receipts (PDRs)

b Includes PTDs, OPDIs, UITFs, ETFs, and PDRs

Source: Bangko Sentral ng Pilipinas