SHORT-TERM investments made by foreign investors were still in net outflow territory for the fourth consecutive month in August, the Bangko Sentral ng Pilipinas (BSP) reported on Thursday.
Data from the Central Bank showed that foreign portfolio investments (FPI) recorded a net outflow of $86 million in August this year. The country’s FPI has been in the net outflow territory since May 2022.
However, this was lower than the $103 million net outflows recorded in July. In August 2021, FPI recorded net inflows worth $11.51 million.
“I think as long as the US Fed continues its hawkish stance, we may have to expect net outflows to dominate,” Unionbank Chief Economist Ruben Carlo O. Asuncion told the BusinessMirror.
FPI are known as “hot” or “speculative” money because they are easily pulled in and out of the local platforms in the slight change of global and local sentiment.
Hot money numbers for August were due to the $878-million gross outflows and $792-million gross inflows for the month.
The $878 million gross outflows for the month were larger by 12 percent or $94 million than the $784 million recorded in July 2022. The US received 72.5 percent of total outward remittances.
“We expect outflows to continue as long as the US hikes according to their latest plan…and BSP does not hike proportionately. Combined with our wide current account deficit since the late 1990s, pressure on the peso will likely continue,” BPI Chief Economist Emilio S. Neri told this newspaper.
In terms of the $792-million registered investments in August 2022, this reflected an increase of 16.3 percent or an increase of $111 million compared to the $681 million in July 2022.
Majority or 76 percent of these investments were in publicly-listed securities, particularly banks; holding firms; property; food, beverage and tobacco; and electricity, energy, power and water.
The remaining investments went to peso government securities at 24 percent of the total and other instruments which accounted for less than 1 percent.
“Investments for the month mostly came from the United Kingdom; United States [US]; Hong Kong; Malaysia; and Luxembourg with a combined share of 82.6 percent,” BSP said.
However, year-to-date transactions between January 1 and August 31, 2022 showed foreign investments registered with the BSP through Authorized Agent Banks (AABs) yielded net inflows of $539 million. This represented a turnaround from the $434-million net outflows noted for the same period last year.
Registration of inward foreign investments delegated to AABs by the BSP is optional under the rules on foreign exchange (FX) transactions.
It is required only if the investor or its representative will purchase FX from AABs 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 its investment but the FX will have to be sourced outside the banking system.