FIRST TIME SINCE FEBRUARY

BSP: Foreign portfolio investments yielded net inflow in October

Foreign portfolio investments (FPI) or “hot money” yielded net inflow in October, the first time since February or prior strict lockdowns due to the COVID-19 pandemic, the Bangko Sentral ng Pilipinas (BSP) reported Thursday.

Data released by the BSP showed FPI last month stood at a net inflow of $439.46 million after seven consecutive months of net outflows starting March of this year.

The last time that “hot money” recorded a net inflow was in February at $40.06 million.

October’s net FPI inflow is also a reversal of the recorded net outflow of $493.65 million in September.

The central bank said the net FPIO inflow resulted from gross inflows of $1.4 billion, which outpaced the $913 million gross outflows for the month.

FPI is also called hot money due to the ease by which the fund enters and exits the markets.

“The net inflow was largely due to hefty gains in the Philippine financial markets, especially in the local stock market (PSEi), after the markets got excited about the timely approval of the P4.5 trillion 2021 national budget by the House of Representatives in October 2020, thereby could help economic recovery prospects and investment valuations,” Rizal Commercial Banking Corp. chief economist Michael Ricafort told GMA News Online.

Ricafort added that recent measures to further re-open the local economy, including some easing of restrictions on tourism, public transportation, religious gatherings, among others also added boost to investor confidence.

The BSP said the $1.4-billion gross registered investments for the month is more than double or 127.8% compared to the $594 million recorded in September.

About 78.8% of investments registered were in PSE-listed securities mainly to information technology firms, banks, holding firms, property companies and food, beverage and tobacco firms; while the remaining  21.2% went to investments in peso government securities.

The United Kingdom, the United States (US), Singapore, Luxembourg and Hong Kong were the top five investor countries for October, with combined share to total at 80.9%.

Outflows for October at $913 million were lower compared to the level recorded for September at $1.1 billion by 16% or by $174 million.

The US received 64.6% of total outflows.

The October net inflow narrowed the year-to-date net outflow to $3.9 billion from $4.4 billion in January to September.

However, this is still larger compared to the $1.2 billion net outflow recorded for the same period last year.

The continued year-to-date net hot money outflow resulted from uncertainties due, among others, to the ongoing impact of the COVID-19 pandemic to the global economy and financial system coupled with international and domestic developments such as geopolitical tensions, certain corporate governance issues and extended quarantine measures in select regions in the country, according to the BSP. 

Sought for comment, BSP Governor Benjamin Diokno said that “foreign portfolio investment is important.”

“But more important is the FDIs (foreign direct investments) because they lead to capital formation and job creation in the country. FDIs into the country have risen in the last four months, defying the dire outlook that global FDIs could shrink by about half due to the pandemic,” Diokno said.

Latest data from the BSP showed FDI rose by 46.9% to $637 million in August, the fourth straight month of increase in net inflows. — RSJ, GMA News