Hot money reverses to net inflows in June

Published August 2, 2021, 7:00 AM

by Lee C. Chipongian

The central bank said it has registered $334.51 million of foreign portfolio net inflows in June, reversing the $235.14 million net outflows same time in 2020, as foreign investors continue to show confidence in the recovering economy although at slower pace than anticipated. The June net inflows, however, were lower than May’s $416.74 million.

The Bangko Sentral ng Pilipinas (BSP) said investor reaction in June was boosted by the third and final reading of Bayanihan 3 or the Bayanihan to Arise as One Act; stable foreign direct investments; the improved April unemployment rate; and the steady inflation rate in May which still breached the government’s two-four percent target.

Investors also made decisions based on: quarantine restrictions in Metro Manila and nearby provinces; the change in the International Monetary Fund’s growth outlook for the Philippines which was cut to 5.4 percent from 6.9 percent previous forecast; the BSP’s non-action to keep policy rates at two percent; and the acceleration in the government’s vaccination rollout.

Gross inflows in June totaled $2.105 billion while gross outflows amounted to $1.771 billion. The US withdrew about 64.8 percent of the total outflows for the month.

The top five investor countries in June were the United Kingdom, the US, Singapore, Luxembourg, and Norway, with 74.2 percent of total share.

About 91 percent of hot money flows were invested in listed securities such as food, beverage and tobacco companies, property firms, banks, holding firms and retail companies. The remaining nine percent were invested in peso-denominated government securities.

Year-to-date, the BSP registered $160.88 million net outflows, an improvement from the $3.231 billion outflows same period last year.

The BSP noted the same domestic and international developments in the first six months of 2021, which influenced investor sentiment, such as reaction to the new Biden administration in the US, the improved vaccination program in the Philippines, the supply side pressures in local inflation and gradual reopening of the economy.

Investors also reacted positively to two important economic-enhancing laws — the Financial Institutions Strategic Transfer Act approved in February which will allow banks to unload bad assets, and the Corporate Recovery and Tax Incentives for Enterprises Act, passed in March, to lower corporate income tax and to modernize fiscal incentives.

For this year, the BSP is projecting total net hot money inflows of $5.5 billion, higher than the actual $4.240 billion registered in 2020.

 
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