THE Philippines got a reprieve in July, as short-term investments made by foreign investors in the local market reverted to the net inflow territory after registering outflows for four consecutive months.
The Bangko Sentral ng Pilipinas (BSP) on Thursday reported an improvement in the country’s foreign portfolio investments (FPI), from a net outflow of $37.72 million in June, to a net inflow of $15.02 million in July.
FPI are known as “hot” or “speculative” money as these are easily pulled in and out of the local platforms in the slight change of global and local sentiment.
This type of foreign investment is usually a measure of the global economy’s investing sentiment to the Philippines in short-term prospects for yields, in contrast to foreign direct investments (FDI) which are investments placed in the Philippines in search for long-term yield.
This is the first monthly net inflow of hot money since February this year, as analysts said short-term investors were pulling out money, or opting not to invest in the Philippines in the previous months due to the anxiety caused by international developments, particularly the United States-China trade war and how it would affect the local scene.
Data from the BSP showed that 76.5 percent of investments registered
during the month were in Philippine Stock Exchange-listed securities,
pertaining manly to banks, holding firms, property companies, retail firms,
food and beverage, and tobacco companies; while the 23.5-percent balance went
to investments in Peso government
securities.
By country source, the United Kingdom, Hong Kong, US, Norway and Malaysia were the top 5 investor-countries for the month, with a combined share to total at 75.6 percent. The US received 77.8 percent of total outflows.
The improvement in the July FPI figure came after significantly lower net outflows were recorded in June. The BSP attributed this to better-than-expected inflation data for the month of June coupled with easing domestic inflation for the second quarter of 2019 and stronger peso forecast.
The recent change in sentiment, according to ING Bank Manila economist Nicholas Mapa, was due largely to “more accommodative” monetary policy settings both here and abroad.
“For the coming months, we could see at least a partial reversal in these outflows with expectations for easy monetary policy and faster Philippine growth in the second half seen to attract inflows rather than prompt outflows,” Mapa earlier said.
Despite the improvement in FPIs in July, the seven-month figure remained in the net outflow territory at $671.5 million for January to July. This is a reversal of the $458.55-million net inflow seen in the same period last year.