MANILA, Philippines – Foreign portfolio investments (FPI) incurred a net outflow last February as investors cashed in their earnings with the coming inflation rate by the Federal Reserve of the United States.
It is shown from the record disclosed by the Banko Sentral ng Pilipinas that foreign portfolio investments, or also known as hot money, published a 545.14 million US dollar net outflow during February, which is an absolute turnaround of a net income of 126.16 million dollars recorded in January.
The recorded value was also higher by 3.3 percent compared to the net outflow of 409.01 million dollars accounted during February in the previous year.
The central bank said that the basis for this was perhaps because of the profit taking and reaction of the investors to reports of possible hike in rates by the Federal Reserve of the United States caused by an expected inflation surge in the middle of the execution of the tax cuts of the United States government.
The US Fed has recorded a three rate hike allotted this 2018 to meet the total increases applied last year.
According to the Banko Sentral ng Pilipinas, inflows climbed to 1.03 billion US dollars by 4.83 percent during February from 981.2 million dollars in 2017 of the same month, which was lower by 36.6. The recorded inflow last month was lower by 36.6 percent compared to the 1.62 billion dollar inflow during January.
Around eighty-one percent of registered investments during February were in the Philippines Stock Exchange (PSE) listed securities, specifically in property, holding, finance, tobacco, food, and beverage firms, and gaming and casino companies.
On the contrary, the remaining nineteen percent went to the Philippine government securities.
Investments accumulated from the United States, United Kingdom, Malaysia, Singapore, Hong Kong, and Luxembourg added up to 85.1% of the entire inflows in February.
In the meantime, outflows hiked to 1.57 billion dollars by 13.2 percent in February from 1.39 billion dollars in 2017 of the same month.
The BSP mentioned that the principal outflow destination remained to be in the United States, collecting 73.8 percent of the overall remittances.
Investors also conveyed concern regarding the effect of the enactment of the Tax Reform for Acceleration and Inclusion (TRAIN) law or the Republic Act 10963 on inflation.
The consumer price index, or CPI, surged rapidly in over 3 years from 4 percent during January to 4.5 percent last month.
The central bank tried to guarantee the effect on inflation of the TRAIN Law is temporary. This can be denoted by the average inflation of 4.3% rather than 3.4% this 2018 before reducing to 3.5% rather than 3.2% in 2019.
The BSP placed a medium period inflation goal of 2 to 4 percent within 2018 and 2020. The central bank last broke its inflation goal of 3 to 5 percent during 2008 as it hit 9.3% because of the increase in prices of food and oil.
The Banko Sentral ng Pilipinas has retained a supportive stance keeping rates of interest unchanged during the past 3 years to aid the growing economy. BSP last increased benchmark rates during September 2014 by 25bps.
This 2018, the BSP expects the Philippines to record a 900 million dollar net outflow.
The Philippines recorded a net FPI outflow of 205.05 million dollars in 2017, opposing the 404.43 million dollars net inflow during 2016. On the other hand, further capital was sent back from the Philippines because of the sequence of inflation rate by the Federal Reserve of the US, and the order for closure of many mining sites.
The central bank was focusing on a 2.5 billion dollar net outflow of the FPI last year. However, the capital withdrawal was lessened by the enactment of the TRAIN Law and the preserved GDP growth.