Hot money inflows? Thank Xi Jinping’s visit, says BSP

Short term investments into the country’s financial markets rose in November thanks to a slew of positive developments including—the Bangko Sentral ng Pilipinas (BSP) claimed—the visit of Chinese President Xi Jinping which was seen to boost the local economy through improved diplomacy and business development.

In a statement, overall transactions for the month resulted in net inflows of $832 million. This reflects a turnaround from the $68 million net outflows recorded last month and an improvement from the $108 million recorded for November 2017.

“This may be attributed to positive investors’ reaction to the following: the decreasing global oil prices, BSP’s decision to raise its policy rate, and progress on the rice tariffication bill, all of which are expected to temper inflation, as well as Chinese President Xi Jinping’s visit to the country, which was expected to further deepen ties with China in terms of diplomacy and business development,” the BSP said.

The central bank said total registered investments last month amounted to $2 billion, more than twice the $953 million figure last month, and reflecting an 80.8-percent growth compared to the $1.1-billion level recorded during the same month a year ago.

During this period, 66.8 percent of fund inflows were directed at Philippine Stock Exchange-listed securities, pertaining mainly to food, beverage and tobacco companies, holding firms, property companies, banks and utilities.

The balance of 33.2 percent went to peso-denominated government securities.

Transactions in peso bonds and PSE-listed securities yielded net inflows of $510 million and $322 million, respectively.

The central bank said the United Kingdom, Singapore, the United States, British Virgin Islands and Cayman Islands were the top five investor countries for the month, with a combined share of 83.5 percent.

Outflows of $1.2 billion for that month were higher by 18.4 percent compared to figures recorded in October 2018 and November 2017, both at levels of about $1 billion.

The US continued to be the main destination of outflows, receiving 84.8 percent of total remittances.

Year-to-date transactions yielded net inflows of $926 million compared to the $635 million net outflows for the same period last year. The improvement is attributed to a large investment in a holding company registered this year.

Registration of inward foreign investments with the BSP is optional under the liberalized rules on foreign exchange transactions.

The issuance of a BSP registration document entitles the investor or his representative to buy foreign exchange from authorized agent banks and/or their subsidiary/affiliate foreign exchange corporations for repatriation of capital and remittance of earnings that accrue on the registered investment.

Without such registration, the foreign investor can still repatriate capital and remit earnings on his investment but the foreign exchange will have to be sourced outside the banking system.