Hot money or foreign portfolio investments continued to flee the country because of global and local uncertainties. For the local scene, uncertainty brought by the upcoming elections in May and the policies to be adopted by the new administration remains a big risk for the investors.
Until the political climate settles and the incoming leadership will articulate and implement its new policies that investors hope would be consistent and attractive, foreign investments will continue to leave the country.
The foreign portfolio investment (FPI) or hot money continued in March to flee the country with outflows of $305 million. This resulted from the $1.6 billion gross outflows that outpaced the $1.3-boillion inflows for the month, reported Business Mirror.
Michael Ricafort, chief economist of the Rizal Commercial Banking Corp., said growing uncertainty over global and local developments could affect the economy and, subsequently dampen investors’ short-term sentiment to the Philippines.
The Bangko Sentral ng Pilipinas (BSP) reported on Thursday that foreign portfolio investments (FPI) in March this year yielded net outflows of $305 million. This resulted from the $1.6-billion gross outflows that outpaced the $1.3-billion gross inflows for the month.
This is also a reversal from the net inflows of $274 million recorded in February and the $14.6-million net inflows in January this year. Despite two months of net inflows, the cumulative FPI standing of the country in the first three months of the year is at a net outflow of $65.3 million.
FPI are known as “hot” or “speculative” money because they are easily pulled in and out of the local platforms with the slight change of global and local sentiment.
The first-quarter net outflow standing of the country’s FPI, however, is smaller than the $483.49-million net outflow in the first quarter of 2021.
The $1.3-billion registered investments for March this year reflected an increase of 35.3 percent compared to the $945 million recorded in February 2022. About 87 percent of these investments registered were in listed securities, particularly in holding firms, property, banks, food, beverage and tobacco; and transportation services. The remaining 13.3 percent went to investments in Peso government securities.
Top 5 investors
The BSP said the top 5 investor countries for the month were the United Kingdom, United States (US), Luxembourg, Singapore and Hong Kong with a combined share-to-total at 78.4 percent.
This was, however, more than offset by the $1.6-billion gross outflows for the month, which were higher by 136.1 percent than the $670 million recorded in February last year. The US received 80.3 percent of total remittances.
Ricafort said increased uncertainty in global and local developments could affect the economy and, in turn, the short-term sentiment of investors to the Philippines.
“For the coming months, more aggressive Fed rate hikes, lingering Russia-Ukraine conflict for more than two months already, some lockdowns in China, as well as election-related uncertainties and possible increase in the local policy rate as early as June 2022 could be headwinds to the recovery in the local economy and financial markets, including on net foreign portfolio investments data,” Ricafort said.
These could potentially be offset by measures to further re-open the economy towards greater normalcy, he added.
Tags: #FPIorhotmoney, #globalandlocalrisks, #incomingadministration, #elections2022