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Tuesday, March 19, 2024

Foreign funds rebounded with $1.2-b net inflow last year

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Foreign portfolio investments or hot money rebounded last year with a net inflow of $1.2 billion, a turnaround from the $195-million net outflow registered in 2017, data from the Bangko Sentral ng Pilipinas show.

The Bangko Sentral said in a statement the positive performance in 2019 was also “attributed to a large investment in a holding company registered in 2018.”

Data showed that while gross inflows slightly declined to $16.03 billion in 2017 from $16.07 billion in 2017, gross outflows also dropped 8.8 percent to $14.8 billion from $16.3 billion in 2017. 

The highest gross inflows were recorded in March at $2.5 billion while the lowest was noted in September at $743 million. On a quarterly basis, the largest inflows were noted in the first quarter at $5.1 billion, representing 32 percent of the total for the year. 

“This may be attributed to the large investment in a holding company registered this year accompanied by investors’ optimism over the passage of the first phase of the government’s tax reform program,” the Bangko Sentral said.

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Portfolio investments registered in 2018 were invested mainly in Philippine Stock Exchange-listed securities (71.4 percent), peso government securities (GS – 20.2 percent), and other peso debt instruments.

The United Kingdom, the United States, Singapore, the Netherlands and  Hong Kong were the top sources of these funds.

Foreign portfolio investments are also called hot money because of the ease they are invested in and taken out of the local financial markets.

Registration of inward foreign investments with the Bangko Sentral is optional under the liberalized rules on foreign exchange transactions.

The issuance of a BSP registration document entitles the investor or his representative to buy foreign exchange from authorized agent banks and/or their subsidiary/affiliate foreign exchange corporations for repatriation of capital and remittance of earnings that accrue on the registered investment.  

Without such registration, the foreign investor can still repatriate capital and remit earnings on his investment but the foreign exchange will have to be sourced outside the banking system.

The BSP expects hot money to register a net outflow of $200 million in 2019.

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