PH still at­tract­ing FDIs, says No­mura/

Philippine Daily Inquirer - - BUSINESS - By Doris Dum­lao-Abadilla @Philbizwatcher

Ja­panese in­vest­ment house No­mura ex­pects the Philip­pines to re­main a mag­net for for­eign di­rect in­vest­ments (FDIs), dis­pelling re­cent con­cerns about a down­turn.

In a re­search note “Philip­pines: Dis­pelling some FDI fears” dated Oct. 12, No­mura economists Euben Paracuelles and La­vanya Venkateswaran said “the up­trend re­mains clearly in­tact.”

The re­search sought to al­lay jit­ters amid re­ports that the eq­uity cap­i­tal com­po­nent of FDIs to the Philip­pines fell by 90.3 per­cent year-on-year in the first half.

“We think this rep­re­sents only part of the FDI pic­ture and thus may be mis­lead­ing,” No­mura said, not­ing that over­all FDI in­flows fell by a much smaller 14 per­cent year-on- year in the first half.

No­mura also pointed out that year-on-year FDI data had been dis­torted by a large base ef­fect from the for­eign pur­chase of a large stake in a lo­cal bank last year, which led to a surge in in­flows of about $2 bil­lion in April 2016.

No­mura was re­fer­ring to a land­mark bank­ing deal in the first half of 2016 when Se­cu­rity Bank took in Ja­panese bank­ing gi­ant Bank of Tokyo-Mit­subishi UFJ as a strate­gic part­ner with a 20-per­cent stake, re­sult­ing in a fresh cap­i­tal in­fu­sion of P36.9 bil­lion.

Af­ter strip­ping out this base ef­fect, No­mura es­ti­mated that to­tal FDI in­flows went up by about 65 per­cent year-onyear in the first half of 2017.

“Given the chunky na­ture of FDIs, we pre­fer to gauge un­der­ly­ing trends by look­ing at FDI lev­els on a 12-month rolling sum ba­sis, which are still clearly show­ing a pickup de­spite the po­lit­i­cal tran­si­tion,” No­mura said.

The re­search also pointed to the lat­est re­port from the Bangko Sen­tral ng Pilip­inas show­ing that, for July, eq­uity cap­i­tal rose sharply to $131 million from the monthly av­er­age of $23 million in the first half.

No­mura said FDIs would likely pick up fur­ther in the near term due to two large im­pend­ing cor­po­rate ac­qui­si­tions. It was re­fer­ring to the buy-in deal by a con­sor­tium that in­cludes Singapore’s sovereign wealth fund GIC and Mac­quarie in geo­ther­mal en­ergy com­pany En­ergy Devel­op­ment Corp. ($1.3 bil­lion) and Ja­pan Tobacco’s buy­out of be­lea­guered Mighty Tobacco ($1 bil­lion).

More­over, No­mura noted that debt in­stru­ments have been the big­ger driver of FDI over the last few years.

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