Investment News Analysis

Hot money – investors warm to Duterte

Hot money, in the form of foreign-portfolio investments (FPIs) – US$451 million worth of them – flooded into the Philippines in June, up from the US$73 million in June last year; a month in which US$522 million left the country. Speculative in nature though these funds may be – this is money looking for a fast return; it can exit as fast as it enters – what they do show is that investor interest in this market remains high. And that’s despite the wait-and-see advice that was being liberally offered by analysts preceding and immediately following the victory of Rodrigo Duterte in the May presidential election.

The main destination for the funds was the Philippine Stock Exchange; 83.8% of them ended up there with the banking, telcoms, food, drinks, tobacco and real-estate sectors being the prime recipients. The top five investor-countries were: the UK, Singapore, the US, Luxembourg and Hong Kong. Combined they accounted for 80.8% of the FDIs.

This has contributed to an encouraging net-inflow picture for the first half of the year; with the US$8.51 billion inbound, more than offsetting the US$7.9 billion outbound – 84.2% of which was destined for the US.

Although investors still have some concerns about the Philippine market – much of it due to the often sensational international media coverage of Duterte’s robust war on drugs – investor interest and involvement has risen quickly since Duterte’s election.

His Cabinet appointments – certainly those of the big ministries – met with their approval, as too did his 10-point economic plan, Socio-economics for the country and its people. Furthermore, his assurances to foreign investors, that they would be treated fairly and that their assets would be safe, were also well received.

All this augurs well for a better showing in the foreign direct investment stakes in which the Philippines is currently trailing many of its peers in the Association of Southeast Asian Nations (Asean).

Duterte’s infrastructure vision for the country is bold but it will come with a huge price tag; his determination to revitalise the agricultural sector by dragging it from decades of neglect to being vibrant and profitable will also be costly, as too will transforming Metro Manila’s hotchpotch of broken or inadequate transport services into an integrated system worthy of a place in the 21st century.

The contest for foreign cash is where the Philippines has to succeed and Duterte and his Cabinet are well aware of that. Ramon Lopez, who heads the Department of Trade and Industry, has described it as a top priority: the target is to make the Philippines one of the three biggest economies in Asean with the highest level of FDI by the end of Duterte’s term in 2022.

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