Bangko Sentral ng Pilipinas INQUIRER FILE PHOTO
A net inflow of hot money worth $181.06 million was posted during the week that the government announced lower-than-expected first-quarter economic growth, as the country benefitted from external developments that pushed portfolio investors to emerging markets like the Philippines.
The latest Bangko Sentral ng Pilipinas (BSP) data showed that for the period of May 15-19, the $437.92-million inflows of foreign portfolio investment exceeded the $256.86-million outflows.
On May 18, the government reported that the gross domestic product (GDP) grew 6.4 percent in the first three months, below most forecasts.
Socioeconomic Planning Secretary Ernesto M. Pernia had blamed the disappointing figure to slower government spending, higher prices of consumer goods, as well as the lack of a boost from election-related expenditures unlike last year.
Pernia had nonetheless pointed out that the Philippines remained among the fastest-growing among emerging Asian economies during the three-month period, only behind China’s 6.9-percent expansion.
“Prior to the release [of the first-quarter GDP report], investors were anticipating a stronger growth data of about 6.7 percent. Bets of an upbeat data likely attracted more foreign investors into the country. Towards the end of the week, there were outflows as the country’s first-quarter growth missed market expectations,” Land Bank of the Philippines market economist Guian Angelo S. Dumalagan said.
“The outflows, however, were not enough to completely offset the initial inflows, suggesting that investors remained generally confident about the strength of the Philippine economy,” Dumalagan added.
Another economist said “the first-quarter GDP print was actually a reason for foreign money to leave the Philippines given that it fell well below market expectations.”
As for the net inflow of portfolio investment that week, the economist explained that “external developments may have been more of the driver with the Trump controversy regarding his dealings with Russia sparking some risk on sentiment.”
“Given that [US President Donald J.] Trump would be battling his political survival, the Fed would probably not be able to hike rates as aggressively, and thus, emerging markets rallied,” he noted. Markets have been betting on a rate hike by the US Federal Reserve this month.
Also, “hopes for an OPEC extension also boosted risk-taking behavior,” he added, referring to the move to extend the cut in the oil output of the members of the Organization of the Petroleum Exporting Countries.
But for the period Jan. 2 to May 19, the $5.869-billion inflows of foreign portfolio investment were lower than the $6.27-billion outflows, resulting in a year-to-date net outflow of $400.84 million.
For 2017, the BSP had projected portfolio investment to yield a net outflow of $900 million by yearend.
Foreign portfolio investments are in the form of placements in publicly listed shares, government and private sector IOUs, and deposit certificates.
Portfolio investments are considered short-term bets—hence the nickname hot money—because these placements may be pulled out quickly. JPV