MANILA – The low interest rate environment in the Philippines and the continued approval of tax reform measures should remedy the outflow of foreign portfolio investment from the country, an economist from Rizal Commercial Banking Corp said on Friday. (RCBC).
Data released Thursday by the Bangko Sentral ng Pilipinas (BSP) showed that registered foreign portfolio investments, also known as hot money due to the speed at which they enter and exit an economy, have recorded net inflows of $ 127 million last August, down from $ 453 million last July.
The highest net outflow since the start of the year was US $ 1.06 billion, recorded in May.
In a report, RCBC Chief Economist Michael Ricafort attributed this improvement in part to sustained gains in local bond / bond markets, to the record issuance of five-year Treasury bonds in the amount of PHP 516.3 billion and fundraising. activities of large companies and conglomerates.
“For the coming months, a further reopening of the economy and a sustained resumption of economic recovery would fundamentally help improve the valuation of investments and, therefore, the data on net foreign investment,” said Ricafort.
He cited other factors that would help attract more hot money to the country, including a continued decline in new 2019 coronavirus (Covid-19) infections, any successful development and deployment of a Covid-19 vaccine and the adoption of various tax reform measures, such as the draft law on business recovery and tax incentives for businesses (CREATE), the draft law on the strategic transfer of financial institutions (FIST) and the draft Law on unified initiatives of government financial institutions in favor of companies in difficulty for economic recovery (GUIDE).
Ricafort also said that the passage of the PHP 166.5 billion Bayanihan to Recover as One Act “will help stimulate more business / economic activity, especially in the latter part of 2020, thereby improving the prospects for economic recovery and market valuations “.
“Local interest rates, still close to record highs, would help further stimulate investment, job creation and other business / economic opportunities, as well as lower borrowing costs / financing costs of listed companies, which would also help increase net income and valuations, assuming all other factors are the same, ”he added. (ANP)