Foreign funds reenter Philippines in October at 21-month high

MANILA, Philippines — Foreign financial market investors returned to the Philippines in October after 7 months of exit, pouring in their biggest investments in nearly 2 years as the economy slowly learns to live with the coronavirus.

Foreign portfolio investments registered a net inflow of $439.46 million last month, the largest in 21 months or since a net inflow of $762.82 million was recorded in January last year, data from the Bangko Sentral ng Pilipinas (BSP) showed.

A net inflow indicates more investments entered than left. Broken down, gross inflows amounted to $1.35 billion, which were slightly offset by gross outflows worth $913.5 million. 

Portfolio inflows are also called “hot money” for the ease by which they enter and exit economies. Due to their nature, such inflows are sensitive to news and developments that highly influence investors’ decision to place their bets in the country. 

For most of the year, the coronavirus pandemic, coupled with lockdowns that crippled economic activity, deterred hot money so much so that BSP was forced to drastically cut projections for net portfolio investments to $2.4 billion from the original $8.2 billion. 

Even the lowered forecast however appears farfetched. With only 2 months left, portfolio investments have remained in the red, posting a $3.94 billion net outflow.

“(This is) brought about by uncertainties due, among others, to the ongoing impact of the COVID-19 pandemic to the global economy and financial system,” the central bank said.

Apart from the virus outbreak, “geopolitical tensions,” “certain corporate governance issues” and quarantine controls forced investors to look away from the Philippines. BSP did not elaborate, but in the past, central bank has cited the Duterte government’s decision to unilaterally review Metro Manila water contracts as investment deterrent.

For the month of October alone, BSP said 78.8% of gross inflows entered listed firms at the Philippine Stock Exchange. Of that total, 46.1% represented shares in Converge ICT acquired during its initial public offering that month. The rest were funneled to shares of banks, holding firms, property companies and food and beverage firms.

The balance of 21.2% of placements, meanwhile, went to peso government securities, the central bank said.

By country source, 80.9% of inflows came from the US, UK, Singapore, Luxembourg and Hong Kong. On the flip side, 64.6% of outflows sought refuge at the US, the world’s safe haven. — Prinz Magtulis