MANILA, Philippines — Foreign portfolio investments continued to flow into the Philippines, catapulting the equities market to a new all-time high late last month with the implementation of a tax reform law as well as the country’s sound macroeconomic fundamentals.
Data released by the Bangko Sentral ng Pilipinas (BSP) showed foreign portfolio investments or hot money yielded a net inflow of $162.16 million in January. The amount, however, was 46.2 percent lower than the $301.33 million recorded in the same month last year.
The Philippines has been recording a net inflow for the past three months or since November last year. Foreign portfolio investments are also called hot or speculative money because of its flighty nature.
“On the overall, transactions for the month yielded net inflows of $162 million attributable to investor optimism over the passage of the first phase of the government’s tax reform program, positive news on corporate earnings, and expected higher government spending for infrastructure projects,” the BSP said.
President Duterte signed Republic Act 10963, or the Tax Reform for Acceleration and Inclusion (TRAIN) Law, last Dec. 19. The law is expected to yield about P90 billion in additional revenue.
The law slashed personal income tax but raised the taxes on petroleum products, sweetened beverages, motor vehicles, and tobacco.
Data showed foreign portfolio investment inflows jumped 41.5 percent to $1.62 billion in January from $1.15 billion in the same month last year.
About 69.2 percent of investments registered during the month were in securities traded at the Philippine Stock Exchange (PSE) particularly holding firms, banks, property companies, food, beverage and tobacco firms and utilities companies that translated to a net inflow of $80 million.
On the other hand, the 30.8 percent balance went to peso government securities that yielded a net inflow of $82 million.
The BSP said the bulk, or 80.2 percent, of the inflows came from the United Kingdom, the US, Malaysia, Singapore, and Hong Kong.
Statistics also revealed outflows jumped 72.7 percent to $1.46 billion in January from a year-ago level of $845.8 million. The US continued to be the main destination, receiving about 80 percent of the total outflows.
After breaking past the 9,000 mark, the PSE index (PSEi) finished at a record high of 9,058.82 last Jan. 29.The PSEi has broken through new record highs for a total of nine times since the start of the year but has since corrected to as low as 8,487.91 last Feb. 12.
The Philippines booked a net foreign portfolio investment outflow of $205.05 million last year, reversing the net inflow of $404.43 million in 2016 as more capital were repatriated from the country due to the series of rate hikes by the US Federal Reserve as well as the closure order on several mining sites.
For this year, the BSP expects the Philippines to book a net outflow of $900 million.