August net foreign investments inflows down 61% — BSP

August net foreign investments inflows down 61% — BSP | Daily Tribune

The country's net inflows of foreign investments in August dropped by 61 percent to $533.95 million from $1.4 billion in July as investors waited for clear signals on inflation and interest rates' trajectories in the United States.

Still, the Bangko Sentral ng Pilipinas reported higher net inflows of $1.2 billion from January to August, up by 543 percent from the $310.8 million recorded in the same period last year.

For August, gross inflows stood at $1.4 billion, down 43.7 percent from $2.4 billion in the previous month. However, they exceeded gross outflows of $836.78 million, which was smaller by 20 percent than July's $1.05 billion.

Equities

The majority of foreign funds was placed in equities with 51.2 percent and a transaction value of $701.83 million. Meanwhile, the remaining 48.8 percent of $668.89 million represented sales of government securities.

Firms that received the bulk of equity investments included banks, transportation firms, holding firms, property developers, and food, beverage, and tobacco manufacturers.

Most investments came from Singapore, the United States, the United Kingdom, Luxembourg and Malaysia.

Meanwhile, the bulk of gross outflows went to the United States with 52.1 percent share or $436.33 million in outward remittances.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said the BSP and Federal Reserve have shared "dovish" signals on inflation and interest rates until next year which will encourage investors to further diversify their portfolios.

Among the best in two years

"The August level is still among the best in more than two years, largely brought about by the first local policy rate cut in nearly four years," he said.

To help increase consumption and investments amid easing inflation rates, BSP cut its policy rate for private banks by 25 basis points (bps) to 6.25 percent in August or ahead of the Federal Reserve's reduction of its own rate by 50 bps in September.

Ricafort said analysts expect the US central bank to cut a total of 200 to 250 basis points by next year which will enable extra cash for investors due to lower borrowing costs.

"There'll be further increase in the demand for loans for consumers, businesses, governments, and other institutions, thereby boosting investments, trade, and other business transactions locally and globally," he said.

"This will translate to higher earnings of firms, as well as higher overall investment valuations," Ricafort continued.