MANILA, Philippines — The Philippines booked a net inflow of foreign portfolio investments or speculative funds amounting to $886.7 million last year, reversing the net outflow of $574.5 million recorded in 2021.
The net inflow was way below the revised $3.5 billion projection set by the Bangko Sentral ng Pilipinas (BSP).
Foreign investments registered by the BSP through authorized agent banks are also known as hot money or speculative funds, as these flow regularly between financial markets as investors attempt to ensure they get the highest short-term interest rates possible.
Data released by the central bank showed that gross inflow of speculative funds declined by 9.4 percent to $12.34 billion in 2022 from $13.62 billion in 2021.
The BSP said that bulk or 78.2 percent were invested in securities listed on the Philippine Stock Exchange (PSE), particularly in property; holding companies; banks; electricity, energy, power and water, as well as food, beverage, and tobacco.
It added that 21.6 percent went to investments in peso government securities while the balance of less than one percent went to other instruments.
According to the central bank, the United Kingdom, Singapore, US, Luxemburg, and Hong Kong accounted for 81.8 percent of the total inflows in 2022.
“On a per investment instrument level, transactions in PSE-listed shares resulted in a net inflow of $179 million, which is a reversal from the $956 million net outflows last year (2021), while those for peso government securities recorded net inflows of $694 million, higher compared to $398 million net inflows in 2021,” the central bank said.
On the other hand, the BSP said that the gross outflow of speculative funds fell by 19.3 percent to $11.46 billion from $14.19 billion.
It pointed out that majority or 95 percent of the outflows represented capital repatriation while the remaining five percent pertained to remittance of earnings.
The US received close to 72.9 percent of the total outflows last year.
For December alone, the country booked a net inflow for the third straight month amounting to $92.95 million, a reversal of the net outflow of $4.38 million in the same month in 2021.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said that the continued net portfolio investments inflows data in December may have to do with improvement in global market risk appetite, as the US stock markets and bond markets bottomed out in terms of price since October, and the gains in the global financial markets increased further after lower-than expected US inflation in November.
“The better net foreign investment data was also due to relatively stronger peso exchange rate since the last week of September 2022 that also supported market sentiment amid recent measures to stabilize both the peso exchange rate and overall inflation,” Ricafort said.
Locally, he explained that measures to further reopen the economy towards greater normalcy, such as the target of 100 percent face-to-face schooling for government schools in November, further pick up in both local and foreign tourism as restrictions were further eased in recent months, have supported higher revenues, earnings, and overall valuation of listed companies and faster
overall economic growth and higher investment valuations.
For this year, the BSP is looking at a net inflow of speculative funds amounting to $5 billion.