Foreign portfolio investments returned to the positive territory in October after recording net inflows for the first time in eight months, data from the Bangko Sentral ng Pilipinas (BSP) showed on Thursday.
Last month’s $439.46-million net inflows of these investments, or “hot money” — so called because of how easily these go in and out of the economy — reversed September’s $493.65-million net outflows.
The latest amount was the widest since the $762.82-million inflows in January last year and higher than the year-ago inflows of $104.53 million.
The October inflows resulted from inflows of $1.35 billion and outflows of $913.49 million.
In a statement, the BSP said the $1.35-billion registered investments for the 10th month were more than double or 127.8 percent bigger than the $594.02 million recorded last month.
The bulk, or 78.8 percent, of these investments were placed in Philippine Stock Exchange (PSE)-listed securities: information technology companies; banks; holding firms; property companies; and food, beverage and tobacco firms. The rest, in government securities.
The United Kingdom, the United States, Singapore, Luxembourg and Hong Kong were the top foreign investors last month. Their investments make up 80.9 percent of the total.
The $913.49-million outflows declined by 16 percent from September’s $1.08 billion. The US remained the main destination of the repatriated funds, accounting for 64.6 percent.
Hot money remained in the negative territory in January to October, with net outflows rising by 221.84 percent to $3.94 billion from the year-ago figure.
The central bank last year put that figure at $1.22 billion.
The BSP said the year-to-date outflows were “brought about by uncertainties due, among others, to the ongoing impact of the Covid-19 (coronavirus disease 2019) pandemic [on] 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.”
The Bangko Sentral expects net hot money inflows to reach $2.4 billion this year.
In an outlook, Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort said hot money could improve in the coming months because of recent gains in the local financial markets amid reports that the proposed P4.5-trillion 2021 national budget is expected to be signed as early as December.
“Further reopening of the economy, including easing of some restrictions on public transport and allowing more businesses to operate again and increase capacity to help the economy recover [or] pick up further and also may lead to higher investment valuations in the country as well as better net foreign portfolio investments data,” he added.
Ricafort also expects more net hot money inflows amid the large fundraising activities of the largest local companies and conglomerates through bond issuances and share sales.
According to the RCBC economist, hot money inflows measure international investor sentiment about the country. He said that although these were short-term in nature, not all of them are, for some “represent some stakes in listed companies.”
“Hot money tends to cash in or cut losses over a relatively shorter period of time, though some net foreign portfolio investments stay for many years, depending on the investment view/horizon,” Ricafort added.