Hot money flows to PH markets turned positive in January

FILE PHOTO: Japan Yen and U.S. Dollar notes are seen in this June 22, 2017 illustration photo. REUTERS/Thomas White/Illustration

MANILA, Philippines — Philippine financial markets started 2021 on firmer footing as more short term investments from overseas flowed into the local economy than left it — a reversal from the figure recorded in the same month of 2020 and the large net outflows tallied at the end of last year.

According to data from the Bangko Sentral ng Pilipinas, foreign portfolio investments registered with the agency for January 2021 yielded net inflows of $98 million resulting from the $952 million gross inflows and $854 million gross outflows for the month.

This marked a reversal from the net outflows of $486.1 million recorded in January 2020 and the $524 million in net outflows recorded in December 2020.

“Developments for the month included, among others, the storming of the US Capitol resulting in several deaths and injuries; the confirmation of Joe Biden as the 46th US President; reports confirming the local transmission of the new COVID-19 variant; emergency use authorization granted by the Food and Drug Administration for two COVID-19 vaccines along with other vaccine rollout policies; and investor reaction to the country’s investment grade rating from Fitch Ratings, which was retained at ‘BBB’ with a stable outlook,” the central bank said.

The central bank noted that the $952 million in gross registered investments for January reflected a 12.2 percent decline compared to the $1.1 billion recorded in December 2020, or by $132 million.

These so-called hot money inflows refer to inward foreign investments in Philippine Stock Exchange-listed securities peso-denominated government securities; peso time deposits with banks with minimum tenor of 90 days; other peso-denominated debt instruments; unit investment trust funds; and other portfolio investments such as exchange traded funds and Philippine depositary receipts.

Of these registered investments, 62.1 percent went to PSE-listed stocks pertaining mainly to banks, holding firms, property companies, food, beverage and tobacco companies and transportation services firms, while the remaining 37.9 percent went to investments in peso-denominated government securities.

The United Kingdom, Singapore, United States, Luxembourg and Hong Kong were the top five investor countries for the month, with combined share to total at 83.4 percent.

Outflows for the month of $854 million were lower compared to the level recorded for December 2020 of $1.6 billion, or by 46.9 percent.  The US received 71.7 percent of total outflows.

Year-on-year, registered investments were 23 percent lower than the $1.2 billion level recorded in January 2020.  Similarly, gross outflows were lower than the outflows recorded a year ago at $1.7 billion or by 50.4 percent.  Furthermore, the $98 million net inflows represented a reversal from the $486 million net outflows recorded for the same period a year ago.