Angelo Taningco
Economist, Treasury Group

Foreign portfolio investment (FPI) reverted to a net inflow position in June-amounting to $80 million for the month-from a net outflow of $24 million recorded in May, according to the latest FPI data of the Bangko Sentral ng Pilipinas (BSP) released on 13 July. The monthly turnaround was due to a bigger monthly increase in FPI’s gross inflows compared to gross outflows.

Figure: Foreign Portfolio Investment Flows
Jan. 2015 – June 2017
($ million)

 
FPI gross inflows rose by $531 million month-on-month (mom) to $2.0 billion in June, and the BSP has mentioned the first tax reform package approval (at the House of Representatives) and the -anticipated resolution- of the Marawi conflict as among those that have positively influenced foreign investor sentiment. By instrument type, Philippine Stock Exchange (PSE)-listed securities got 82% of the total gross inflows while government securities and other peso-denominated debt instruments took 17% and 1%, respectively. Bulk or approximately 90% of the mom increase in gross inflows went to PSE-listed securities.

Conversely, FPI gross outflows in June totaled $1.9 billion, up by $427 million from May, with the outflows for the month being partly induced by foreign investors’ response to the federal funds rate hike in the United States (US) made in mid-June. The month’s gross outflows were felt more in the equity market, with 69% of the total coming from PSE-listed securities whereas 31% were in government securities. In addition, 63% of the monthly increase in FPI gross outflows came from PSE-listed securities and 37% from government securities.

On a year-to-date basis, FPI net flows remained in negative territory, recording a net outflow of $461 million spanning the January-June period. We think that FPI could sustain its net inflow position in the upcoming months, and may even record one for the full year especially if the domestic macroeconomic environment remains strong. Robust economic growth and manageable inflation that are supported by appropriate fiscal and monetary policies coupled with healthy corporate earnings will help attract more foreign portfolio capital in the near term.

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