BSP registers $417M net hot money inflows

Published June 25, 2021, 1:00 PM

by Lee C. Chipongian

The central bank-registered foreign portfolio investments or “hot money” reverted to a net inflow in May of $416.74 million, bucking three straight months of net outflows.

Based on Bangko Sentral ng Pilipinas (BSP) data, the $416.74 million net inflows resulted from gross inflows of $1.458 billion and gross outflows of $1.041 billion.

The BSP noted the factors for the net inflows which include several domestic developments such as: the country’s inflation of 4.5 percent in April 2021 which is still consistent with the outlook that inflation will breach the two-four percent target in the first half of this year due to supply side pressures; and data on the country’s GDP which posted a decline of 4.2 percent year-on-year in the first quarter of 2021.

“(The) GDP is also expected to grow in the second quarter of the year with the support of key legislations, the CREATE and the FIST Acts,” said the BSP.

Other factors that contributed to the hot money inflows were the BSP’s decision to maintain policy rates at two percent, the government’s decision to place Metro Manila and select provinces under general community quarantine status with heightened restrictions, the latest rebalancing of MSCI indices and the S&P Global Ratings maintained BBB+ rating on the Philippines and assigned a stable outlook, said the BSP.

The months of January and May are the only time the BSP registered hot money net inflows.

The May net inflows is also a reversal of the $1 billion net outflows recorded same time in 2020. Last year, gross inflows only amounted to $486.26 million while gross outflows totaled $1.492 billion.

Hot moneys are inward foreign investments in listed companies, peso-denominated government securities (GS); peso time deposits with banks with minimum tenor of 90 days, other peso debt instruments. These funds are also invested in unit investment trust funds and other portfolio investments such as Exchange Traded Funds and Philippine Depositary Receipts.

The BSP said about 67.9 percent of investments went into listed securities at the Philippine Stock Exchange such as utility companies, property firms, banks, holding firms and food, beverage and tobacco companies. The remaining 32.1 percent were invested in GS.

The top investing countries with a combined 88 percent of the total were the United Kingdom, Singapore, US, Luxembourg, and Norway.

The BSP recently revised its external sector outlook. It now expects foreign portfolio investments of $5.5 billion for 2021 versus previous forecast $5.7 billion.