Portfolio outflows may reverse before yearend

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By Melissa Luz T. Lopez,
Senior Reporter

THE PHILIPPINES could see more foreign capital entering the country in the coming months which could trim the outflows expected for the entire year, a Bangko Sentral ng Pilipinas (BSP) official said.

BSP Deputy Governor Diwa C. Guinigundo said there could be room to see more foreign portfolio investments during the last four months of the year, which would narrow the current net outflow tally as of mid-August.

“This is part of market dynamics but so far, if you look at the numbers, on a net basis it’s less than a $300-million net outflow. We would expect that as more positive news are released — of course we expect exports to continue recovering, imports to stabilize and growth to continue showing a robust pace — we should see some recovery in terms of portfolio investments,” Mr. Guinigundo said in a recent ambush interview.

“The dynamics can change, and to me it can change for the better. We have started to review that for release in October.”

Foreign portfolio investments are called “hot money” given the ease by which these funds enter and leave markets. Bulk of these flighty funds are often invested in publicly listed companies, while about a tenth are placed on government-issued debt papers.

The BSP expects a $900-million net hot money outflow this year as of their May assessment. Year-to-date portfolio investments resulted in just a $292.63-million net outflow as of Aug. 25 as $10.589 billion worth of inbound investments were offset by $10.881 billion that fled the country, according to latest central bank data.

In 2016, the Philippines received $404.43 million in net inflows of flighty capital.

While uncertainties remain in the global financial markets, Mr. Guinigundo said there may still be scope for more investors to see the Philippines as a good place to make bets on.

“The market is very volatile especially now, it looks like labor market news in the US is not doing very well,” the BSP official said.

The Philippine economy grew by 6.5% during the second quarter, picking up from the 6.4% pace posted a quarter ago and matching the low end of the government’s 6.5-7.5% growth goal for the year.

Philippine exports of goods have been posting double-digit increases, recovering from contractions observed the past year. Imports are likewise growing at the same pace amid greater need for capital goods for the planned infrastructure spending boom in the country.

Mr. Guinigundo noted that the BSP’s recent forecasts factored in market conditions back in May, so a fresh review will be conducted soon to reflect latest developments.