November 25, 2017 | MANILA, PHILIPPINES

Foreign portfolio investments yield net inflow in April

FOREIGN CAPITAL flows posted a mild recovery in April amid bets that the Philippine economy will clock in above-six percent growth over the next two years, the Bangko Sentral ng Pilipinas (BSP) said, although the four-month tally still saw more outbound funds due to heightened global uncertainty.

Foreign portfolio investments -- also called “hot money” given the ease by which funds enter and leave markets -- yielded a $51.49 million net inflow last month, reversing a $459.86-million outflow seen in March and $354.05 million in net outbound capital in April 2016.

The country saw $1.32 billion in gross inflows in April, partially offset by $1.269 billion in foreign placements which fled the country. This compares to $1.274 billion in investments during the same period last year, which was cancelled by $1.628 billion that headed for the exit.

In a statement, the BSP attributed the entry of more hot money flows in April to positive investor sentiment on first-quarter and full-year Philippine economic growth prospects.

That month, the World Bank said Philippine gross domestic product (GDP) will likely expand by 6.9% this year and in 2018, allowing the country to “remain a top performer” across the region.

Markets also expected GDP growth to have remained strong between January-March, the central bank said. On Thursday, the Philippine Statistics Authority announced a 6.4% expansion for the quarter, still robust but below the government’s 6.5-7.5% target for the year.

The April tally also reversed two straight months of outflows, but failed to pull the four-month tally back to positive territory. Hot money ended with $516.04 million in net outflows as of end-April, a turnaround from the $56.26-million inflow during the comparable year-ago period.

“I think we are still in the process of consolidation, in the sense that the market is still adjusting to the realities not only here but also abroad. We still have lots of volatilities in the market,” BSP Deputy Governor Diwa C. Guinigundo told reporters on the sidelines of the BusinessWorld Economic Forum on Friday when sought for comment.

“As we move along, I think the market is digesting all of these news also what happened here in the Philippines.”

Mr. Guinigundo said among the key sources of uncertainty are future interest rate hikes and fiscal policy changes in the United States, coupled with reforms on taxation being pursued here.

Roughly 67.8% of portfolio investments tallied in April went to the local stock market, with foreigners placing their bets on publicly-listed holding firms; banks; property companies; food, beverage and tobacco firms; and telecommunication companies, the central bank said. These placements yielded $33 million in net outflows.

On the other hand, about a third of the foreign capital was used to acquire government-issued debt papers that resulted in $82 million inflows, while investments on other peso debt notes saw $3 million in inbound capital.

Investments mostly came from Singapore, United Kingdom, US, Malaysia, and Hong Kong last month. However, some 75.7% of the outbound flows went back to the US during the period.

The BSP expects $900 million in net hot money outflows this year, which if realized will reverse a $404.43 million net inflow of portfolio investments in 2016. However, central bank officials have said they will announce new estimates within the month to factor in recent developments in financial markets.