At end-Q1, hot money back to net outflow

FOREIGN short-term investor sentiment turned sour towards the latter part of the first quarter of 2022 as more investors chose to pull out their capital from the Philippines in March. A private bank economist 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.

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.

Rizal Commercial Banking Corporation (RCBC) chief economist Michael 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.

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