More hot money enters in January

MANILA, Philippines — Foreign portfolio investments booked a net inflow in January, reversing the net outflows in the same month and in December last year, as Fitch Ratings retained the country’s investment grade rating and stable outlook despite the impact of the global health crisis.

Data released by the Bangko Sentral ng Pilipinas (BSP) showed a net hot money inflow of $97.92 million in January, turning around from the $486.1 million net outflow in the same month last year and the $523.86 million outflow last December.

The BSP said the reversal could be attributed to investors’ positive reaction to the country’s investment grade rating that was retained at BBB by Fitch on the back of a stable outlook amid the recession caused by the COVID-19 pandemic.

The Philippines slipped into recession with a record 9.5 percent gross domestic product (GDP) contraction in 2020, ending more than two decades of growth, as the economy stalled when the government imposed the longest and strictest lockdown in the world.

Investors, likewise, turned optimistic after the Food and Drug Administration (FDA) granted emergency use authorization to two COVID-19 vaccines as part of the country’s rollout policies.

However, negative developments in January include the storming of the US Capitol that resulted in several deaths and injuries and reports confirming the local transmission of the new COVID-19 variant.

As a result, gross inflows of speculative funds primarily from the UK, Singapore, US, Luxembourg and Hong Kong fell by 23 percent to $951.61 million in January from $1.23 billion in the same month last year.

About 62.1 percent of investments registered were in securities traded at the Philippine Stock Exchange particularly banks, holding firms, property companies, food, beverage and tobacco companies as well as transportation services firms.

The remaining 37.9 percent were invested in peso government securities.

On the other hand, gross outflows of foreign portfolio investments plunged by 50.4 percent to $853.7 million in January from $1.72 billion in the same month last year.

The net outflow of foreign portfolio investments more than doubled to $4.24 billion last year from $1.9 billion in 2019 as speculative investors opted to fly to safe haven countries amid the general riskoff sentiment in the markets due to the COVID-19 pandemic.

The gross inflow of foreign portfolio investments plunged 29.6 percent to $11.68 billion last year from $16.6 billion in 2019, while gross outflows slipped by 13.9 percent to $15.92 billion from $18.5 billion.

For this year, the BSP expects a net inflow of $3.5 billion as the country is seen recovering from the pandemic-induced recession with a GDP growth of 6.5 to 7.5 percent.