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Hot money posts inflows in May

Joshua Lao

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Foreign portfolio investments also known as hot or speculative money, posted a reversal after registering net inflows for the month of May. 

Data from the Bangko Sentral ng Pilipinas (BSP) show hot money yielding net inflows of $416.74 million resulting from hefty gross inflows of $1.23 billion versus gross outflows of just $1.04 billion. 

 

The latest gross inflow reflected a whopping 124 percent expansion in May 2021 from the posted $651 million in April 2021. 

Bulk or 67.9 percent of the inflows were placed heavily in securities listed in the local bourse while the remaining 32.1 percent went to peso-denominated government IOU.  

Top investor countries during the month include the United Kingdom, United States (US), Luxembourg, Singapore and Norway, comprising 88 percent share to the overall stock. 

Gross outflows during the month likewise went up by 1.6 percent, majority of which or about 69.5 percent exited to the US.

“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 (gross domestic product) which posted a decline of 4.2 percent year-on-year in the first quarter of 2021,” the central bank explained. 

While GDP declined in the first quarter of 2021, the BSP explained that economic growth could be faster in the succeeding quarter owing to the legislation of key reforms, the retained accommodative policy stance of the central bank and the retained credit score of the Philippines. 

On a cumulative basis, foreign portfolio investments yielded net inflows of $230.70 million, a reversal of the listed $3.08 billion net outflows in the same period year-ago. 

Michael Ricafort, chief economist at the Rizal Commercial Banking Corp. said that the recent affirmation of S&P Global Ratings along with the same decision by other credit watchdogs will help shore up confidence towards the country, yielding more foreign investments in the process. 

In addition, Ricafort said that the expected increase in COVID-19 vaccines in the second half of the year will help justify measures to further reopen the economy, auguring well for the Philippines’ investment valuations.   

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