Foreign portfolio investments yield net inflows in June 2021

Bangko Sentral ng Pilipinas (BSP)-registered foreign portfolio investments (FPIs)¹ for June 2021 yielded net inflows of US$335 million resulting from the US$2.1 billion gross inflows and US$1.8 billion gross outflows for the month.

This is lower than the net inflows of US$417 million recorded in May 2021.

The US$2.1 billion registered investments for June 2021 reflected a 44.4 percent (or by US$648 million) increase compared to the US$1.5 billion recorded in May 2021.

About 91.0 percent of investments registered were in PSE-listed securities (investments mainly in food, beverage and tobacco companies, property firms, banks, holding firms and retail companies) while the remaining 9.0 percent went to investments in Peso government securities.

The United Kingdom, United States (US), Singapore, Luxembourg, and Norway were the top five (5) investor countries for the month with combined share to total at 74.2 percent.

Gross outflows for the month (US$1.8 billion) were higher by 70.1 percent (or by US$730 million) than the level recorded for May 2021 (US$1.0 billion).  The US received 64.8 percent of total outflows.

Domestic developments during the month included investor reaction to:

(i) the approval by the House of Representatives  on the third and final reading of the Bayanihan to Arise as One Act which aims to provide financial aid to be given to all Filipinos amid the COVID-19 pandemic;

(ii) positive data on foreign direct investments in the country;

(iii) unemployment rate for April 2021; (iv) inflation rate for May 2021 which remained unchanged at 4.5 percent since March;

(iv) government’s decision to maintain quarantine restrictions in Metro Manila and some nearby provinces;

(v) International Monetary Fund’s downgrading of the country’s growth outlook for this year;

(vi) the BSP’s decision to maintain policy rates; and (vii) the progress in the nation’s inoculation program.

Year-on-year, registered investments rose by 106.6 percent from the US$1.0 billion recorded in June 2020.  Gross outflows were higher than the outflows recorded a year ago (US$1.3 billion or by 41.2 percent).

Furthermore, the US$335 million net inflows were a reversal compared to the US$235 million net outflows recorded for the same period a year ago.

Transactions for BSP-registered FPIs from 1 January to 30 June 2021 yielded net outflows of US$106 million, lower than the US$3.3 billion net outflows noted for the same period last year (1 January to 30 June 2020) amid the ongoing impact of the COVID-19 pandemic to the global economy and financial system.

This has been accompanied by international and domestic developments such as the:

(1) new US administration;

(2) progress of vaccine rollout in the country;

(3) continuing  quarantine measures to contain the surge in COVID-19 infections;

(4) the country’s inflation breaching the 2.0 to 4.0 percent target which is consistent with the outlook that such will persist during the first half of this year due to supply side pressures; and

(5) the slowing down in the contraction of the country’s GDP which posted a decline of 4.2 percent year-on-year in Q1 2021 from a high of 17.0 percent in Q2 2020.

GDP is expected to grow in the second quarter of the year with the support of key legislations, the CREATE and the FIST Acts.

Registration of inward foreign investments with the BSP is optional under the rules on foreign exchange transactions. It is required only if the investor or its representative will purchase 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 its investment but the foreign exchange will have to be sourced outside the banking system.

 

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¹ Refer to inward foreign investments in PSE-listed securities (PSE); Peso-denominated government securities (GS); Peso time deposits with banks with minimum tenor of 90 days; other Peso debt instruments; unit investment trust funds; and other portfolio investments such as Exchange Traded Funds and Philippine Depositary Receipts