Septem­ber in­flows fail to lift hot money year to date — BSP

Business World - - FRONT PAGE - Melissa Luz T. Lopez

MORE for­eign funds en­tered the coun­try in Septem­ber as in­vestors saw the first of up to five tax re­form pack­ages — lynch­pin of an P8.44-tril­lion in­fra­struc­ture devel­op­ment pro­gram — progress through the Se­nate that month, the Bangko Sen­tral ng Pilip­inas (BSP) re­ported yes­ter­day.

For­eign port­fo­lio in­vest­ments — which are of­ten called “hot money” as these en­ter and leave the coun­try with ease — posted a $ 112.63- mil­lion net in­flow last month, turn­ing around from a $57.52-mil­lion net out­flow in Au­gust and the $807.15 mil­lion that left the Philip­pines a year ago.

For­eign in­vestors saw the Philip­pines as a fa­vor­able site for short-term place­ments in Septem­ber, partly in the wake of the Aug. 22- Sept. 19 Chi­nese “ghost month” that dis­cour­aged them from mak­ing big bets.

For­eign in­vestors plunked in $ 1.297 bil­lion in the coun­try in Septem­ber, 38.49% more than Au­gust’s $936.28 mil­lion and 1.81% more than a year-ago’s $1.274 bil­lion.

Last month’s $ 1.184- bil­lion out­flows were 19.14% more than Au­gust’s $ 993.8 mil­lion but were 43.1% less than the $2.081 bil­lion that left the coun­try in Septem­ber last year.

“This may be at­trib­uted to in­vestor re­ac­tion to the ex­ten­sion of the debt limit dead­line in the United States and the Philip­pine Se­nate’s ap­proval of the first pack­age of the govern­ment’s tax re­form pro­gram,” the BSP said in a state­ment.

On Sept. 21, the Se­nate Com­mit­tee on Ways and Means ap­proved its ver­sion of the first of up to five tax re­form pack­ages that are sup­posed to help fi­nance the ad­min­is­tra­tion’s am­bi­tious public in­fra­struc­ture devel­op­ment pro­gram that will see an­nual spend­ing on this item hit P1.899 tril­lion, equiv­a­lent to 7.45% of gross do­mes­tic prod­uct (GDP), in 2022 from the P847.22 bil­lion, or 5.32% of GDP, pro­grammed this year.

The devel­op­ment paves the way for ple­nary dis­cus­sions and ap­proval by that cham­ber which would bring the mea­sure closer to the Jan­uary 2018 im­ple­men­ta­tion eyed by the De­part­ment of Fi­nance.

The same op­ti­mism was cited by the cen­tral bank when the House of Rep­re­sen­ta­tives ap­proved its ver­sion, House Bill No. 5636, on May 31, stok­ing in­vestor ap­petite and bring­ing June hot money back to net in­flow ter­ri­tory.

Last month also saw US Pres­i­dent Don­ald Trump en­act a bill to ex­tend the govern­ment’s debt limit for three months and pro­vide about $15.25 bil­lion in storm-re­lated as­sis­tance.

Roughly 80.9% of Septem­ber’s in­vest­ments were in­fused in shares in pub­licly listed com­pa­nies — hold­ing com­pa­nies; prop­erty firms; banks; casi­nos and gam­ing firms; as well as food, bev­er­age and to­bacco com­pa­nies — yield­ing a $42-mil­lion net out­flow.

Nearly a fifth of in­flows were in­vested in pe­so­de­nom­i­nated govern­ment- is­sued debt pa­pers, which re­sulted in a $150-mil­lion net in­flow.

Place­ments in peso time de­posits brought in $5 mil­lion, the cen­tral bank said.

The United King­dom, the United States, Sin­ga­pore, Nor­way and Lux­em­bourg were the big­gest sources of for­eign funds last month, ac­count­ing for 79.4% of total in­flows.

“The US con­tin­ued to be the main des­ti­na­tion of out­flows, re­ceiv­ing 79.1% of total re­mit­tances,” the BSP noted.

How­ever, Septem­ber’s in­flows were not enough to pull the yearto-date tally higher, re­sult­ing in a $ 206.25- mil­lion net out­flow that was a re­ver­sal from the $1.267-bil­lion net in­flow in 2016’s com­pa­ra­ble nine-month pe­riod.

Con­cerns about a loom­ing rate hike by the US Fed­eral Re­serve, global ter­ror­ist at­tacks and North Korea’s mis­sile tests con­tin­ued to spook in­vestors.

BSP added that the im­pact of the govern­ment’s crack­down ear­lier this year on min­ers deemed vi­o­lat­ing en­vi­ron­ment laws also had a telling im­pact on sen­ti­ment.

The cen­tral bank sees a $900-mil­lion net out­flow for the en­tire year, re­vers­ing from the $ 404.43- mil­lion net in­flow of flighty for­eign funds in 2016.

The BSP yes­ter­day also al­layed con­cerns that the Philip­pine econ­omy has lost its ap­peal as an in­vest­ment des­ti­na­tion as for­eign di­rect in­vest­ments (FDIs) have dropped from a year ago.

Per­ma­nent in­vest­ments to the Philip­pines to­talled $ 3.904 bil­lion as of July, down 16.5% from the $ 4.677 bil­lion recorded in 2016’s com­pa­ra­ble seven months.

“Data showed that the sig­nif­i­cant in­flow noted last year was at­trib­uted to a large in­vest­ment flow that went to the fi­nan­cial and in­surance in­dus­try,” the BSP said in a sep­a­rate state­ment, cit­ing 2016’s high base.

“Year- on-year growth rates can be af­fected by the tim­ing of en­try of big ticket items, with re­sult­ing base ef­fects. Thus, the monthly pro­file of FDI flows can be volatile and may not ex­hibit a smooth up­ward trend due to its lumpy na­ture.”

To re­call, the Bank of Toky­oMit­subishi UFJ in­fused P36.9 bil­lion as a one-time in­vest­ment in April last year, as it bought a 20% stake in Se­cu­rity Bank Corp. —

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