Lower capital placement in May causes FPI $270-M net outflows

SHORT-TERM investments made by foreign investors reverted to the net outflow territory in May this year, owing mainly to lower capital placement during the month.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that foreign portfolio investments (FPI)—OR more popularly known as “hot” money—yielded net outflows of $270 million in May, resulting from the $1.2-billion gross outflows which outpaced the $966 million gross inflows for the month.

The month’s FPI yield is a reversal from the net inflows of $1.4 billion recorded in April 2022. It is also a reversal of the net outflow in May last year of $416.74 million.

FPIS are known as “hot” or “speculative” money because they are easily pulled in and out of the local platforms in the slight change of global and local sentiment.

The $966-million registered investments for May 2022 reflected a decrease of 55.7 percent compared to the $2.2 billion recorded in April 2022.

According to the Central Bank, 80.1 percent of the registered investments during the period were in listed securities, or investments mainly in the sectors of information technology; banks; property; holding firms; and Telecommunications.

Meanwhile, the remaining went to investments in Peso government securities, comprising 18.3 percent of the total and other portfolio investments comprising 1.7 percent.

Investments for the month mostly came from the United Kingdom, United States (US), Singapore; Luxembourg; and Hong Kong with a combined share of 76.2 percent.

The $1.2 billion gross outflows for the month were larger by 50.1 percent than the $823 million recorded in April 2022.

The US received 80.7 percent of total remittances.

For the first five months of the year, FPIS yielded net inflows of $1.1 billion, a turnaround from the $441 million net outflows noted for the same five-month period last year.

Volatility to continue

RIZAL Commercial Banking Corporation (RCBC) chief economist Michael Ricafort said volatility in global markets could continue in the coming months, which could reflect in the country’s hot money performance.

“For the coming months, if the Russia-ukraine conflict drags on/ continues, global oil and commodity prices would linger at multiyear highs, leading to elevated inflation, and more aggressive Fed rate hikes,” Ricafort said.

“These could lead to risks of economic slowdown or even recession in the US, which is the world’s biggest economy, thereby could lead to continued volatility in the global and local financial markets,” he added.