Foreign portfolio investments or hot money rebounded in May with a net inflow of $417 million from the $1.1-billion net outflow registered a year ago, as fund managers reacted positively to the prevailing low-interest rate environment, stable inflation, and the country’s investment grade rating that was affirmed by a major credit rating agency, the Bangko Sentral ng Pilipinas said Friday.
Data from the BSP showed that gross inflows reached $1.5 billion in May, offsetting the $1-billion gross outflows. The $1.5-billion registered investments during the month reflected a 124-percent (or $807 million) increase from $651 million recorded in April.
About 67.9 percent of these investments went to Philippine Stock Exchange-listed securities (utility companies, property firms, banks, holding firms and food, beverage and tobacco companies), while the remaining 32.1 percent were parked in peso government securities.
The United Kingdom, Singapore, the United States, Luxembourg and Norway were the top five sources of foreign funds with combined share of 88 percent in May.
“Domestic developments during the month included the country’s inflation of 4.5 percent in April 2021 which is still consistent with the outlook that inflation will breach the 2 to 4 percent target in the first half of this year due to supply side pressures; data on the country’s GDP which posted a decline of 4.2 percent year-on-year in the first quarter of 2021,” the BSP said.
The 4.2-percent first-quarter GDP growth was an improvement from the 8.3-percent contraction in the fourth quarter of 2020, but deeper compared to the 0.7-percent decline in the first quarter of 2020.
It said other factors that contributed to the net inflow in May were the expectations of a GDP expansion in the second quarter with the support of key legislations, the BSP’s decision to maintain policy rates, and S&P Global Ratings’ move to maintain the “BBB+” rating on the Philippines with a stable outlook.
Portfolio investments yielded a net outflow of $441 million in the first five months, an improvement from the $3.1-billion net outflow in the same period last year amid the lingering impact of the COVID-19 pandemic to the global economy and financial system.
“This has been accompanied by international and domestic developments such as the new US administration, vaccine rollout and the re-imposition of additional quarantine measures to contain the surge of coronavirus infections,” the BSP said.
Registration of inward foreign investments with the BSP is optional under the liberalized rules on foreign exchange transactions.
Foreign portfolio investments are also called hot money because of the ease they are invested in and taken out of the domestic financial markets. Last year, foreign portfolio investments yielded a net inflow of $5.3 billion. This year, the BSP expects hot money to post a net inflow of $5.5 billion.