$417-M in ‘hot money’ entered PHL in May – BSP

Foreign portfolio investments (FPI) yielded a net inflow in May, reflecting renewed optimism in the local economy as restriction measures were gradually lifted during the month. 

Hot money – dubbed as such due to the ease by which these funds enter or leave an economy – posted a net inflow of $416.74 million in May, based on data released by the Bangko Sentral ng Pilipinas (BSP) on Friday. 

This is a turnaround from the $1.006 billion in net outflow in the same month of 2020 as well as the $373.95 million in net outflow logged in April. 

Key developments in May included the further easing of restriction measures in Metro Manila and adjacent provinces; S&P Global Ratings’ affirmation of the country’s credit rating; and the central bank’s decision to keep its record low key policy rate, among others. 

The BSP also cited the steady May inflation, which stood at 4.5% for a third straight month; and the release of data showing gross domestic product (GDP) shrank by 4.2% in the first quarter. 

Asian Institute of Management economist John Paolo R. Rivera said the hot money inflows in May may have been buoyed by previous investment pledges as well as the pickup in the mass vaccination campaign.  

“It seems that this may be a lagged effects of previous pledges entering the economy just now. These may be inflows related to short term investment decisions to take advantage of the interim opening of the economy,” Mr. Rivera said in a Viber message. 

“We cannot also ignore the fact that the Philippines is vaccinating, and economic recovery is underway,” he added. 

For his part, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said fund-raising activities during the month, particularly Monde Nissin’s initial public offering also supported the FPI inflows into the country.  

The maker of Lucky! Me noodles raised P48.6 billion from its initial public offering (IPO), considered to be the biggest ever debut in the Philippines. 

Based on BSP data, inflows in May ballooned to $1.458 billion from $486.26 million a year earlier. It was also more than twice the $651.16 million recorded in April. 

Meanwhile, outflows dropped 30% to $1.041 billion from $1.492 billion a year earlier. It however inched up by 1.56% from the $1.025 billion in April. 

Top investor countries during the month were United Kingdom, Singapore, United States, Luxembourg, and Norway, which made up 88% of the total investments. 

More than two-third (67.9%) of the FPIs during the month went mainly to securities listed in the Philippine Stock Exchange such as utility companies, property firms, banks, holding firms and food, beverage and tobacco companies. The remaining 32.1% went into investments in government securities, the BSP said. 

For the first five months of 2021, hot money posted a net outflow of $441 million, dropping by 85.8% from the $3.1 billion in the same period of 2020. 

Mr. Rivera said the central bank’s decision to keep interest rates at record lows could help attract foreign investments in the coming months. 

However, Mr. Ricafort said prospects for short-term portfolio investments remain cloued due to the emergence of more contagious coronavirus variants and the delays in the arrival of vaccine supplies.  

The central bank last week said it projects hot money to yield a net outflow of $5.5 billion, slightly lower than the previous estimate of $5.7 billion net outflow.