More ‘hot money’ enters the country in April

More foreign capital entered the country in April reflecting improved economic conditions as pandemic restrictions further eased.

Data from the Bangko Sentral ng Pilipinas (BSP) showed foreign portfolio investments (FPI) or “hot money,” yielded a net inflow of $1.36 billion in April, a reversal from the $373.95 million net outflow seen in April 2021.

This was also a turnaround from the $305.08 million in net outflow recorded in March.

The net inflow of foreign portfolio investments reflected improving pandemic conditions and pandemic management relative to other economies, Asian Institute of Management economist John Paolo R. Rivera said in a Viber message.

In the first three months of the year, the Philippine economy expanded by a better-than-expected 8.3% growth, surpassing the pre-pandemic output level amid the easing of coronavirus disease 2019 (COVID-19) curbs.

Metro Manila and other parts of the country were put under tighter restrictions in January to contain an Omicron-driven surge in COVID-19 infections. This was downgraded to the most lenient alert level in March that allowed businesses to operate at full capacity.

Mr. Rivera also mentioned that the response of the Philippine economy to stimulus from abroad such as the US Federal Reserve’s policy direction in the country affected investor confidence.

“Market sentiment also supported by generally better local economic data recently as bright spots for the economy,” said Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort in an e-mail.

BSP data showed gross inflows of hot money climbed by 70.1% to $2.18 billion from the $651.16 million a year prior.

The top five investor countries during the month included Singapore, the United Kingdom, the United States, Hong Kong, and Luxembourg which accounted for 94.3% of foreign portfolio investment inflow.

Majority of investments went to securities of electricity, energy, power and water; banks; holding firms; property; and transportation services. The rest were invested in peso government securities.

Meanwhile, gross outflows for the month decreased to $823 million from $1.025 billion a year ago.

In the first four months of the year, the BSP-registered FPIs yielded net inflows rose to $1.34 billion, a reversal from the $857.44 million net outflows in the same period last year.

For the coming months, foreign investments are expected to come in as the next government assembles its economic team, Mr. Rivera said.

“So far, the incoming Marcos administration is getting this right,” he added.

International developments will likely continue to cause worry among foreign investors, Mr. Ricafort said.

“More aggressive Fed rate hikes, lingering Russia-Ukraine conflict for more than three months already, some lockdowns in China could be external headwinds to the recovery in the local economy and financial markets,” he added.

The central bank expects hot money to yield a net inflow of $4 billion in 2022. — Keisha B. Ta-asan