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Philippines: Hot money outflow highest in 6 years
MANILA, Philippines — The Philippines booked the biggest outflow in foreign portfolio investments in more than six years as global investors avoided the country while others cashed in on their holdings due to the coronavirus disease 2019 or COVID-19 pandemic.
Data released by the Bangko Sentral ng Pilipinas (BSP) showed the country recorded a net foreign portfolio investment outflow of $961.05 million in March, the highest since the $1.84 billion net outflow in January 2014.
The net outflow last March was also 30 percent higher than the $739 million booked in the same month last year.
“This may be attributed to the general risk off sentiment in the market that has prompted investors to liquidate portfolios and keep money in cash amid heightened worries over adverse economic impact of the COVID-19 pandemic and despite the initial fiscal stimulus package of the government,” the central bank said.
Foreign portfolio investments are also called hot or speculative money because of their flighty nature.
Data showed inflows of foreign portfolio investments plummeted by 45 percent to $953.8 million in March from $1.73 billion in the same month last year.
About 93 percent of investments registered during the month were in securities listed in the Philippine Stock Exchange (PSE) particularly property companies, holding firms, banks, food, beverage and tobacco companies and transportation services firms.
The remaining seven percent went to investments in peso government securities.
The UK, US, Singapore and Hong Kong were among the top investor countries, with a combined share of 83.9 percent.
Likewise, outflows of foreign portfolio investments dropped by 22.5 percent to $1.91 billion from $2.47 billion. The US received 68.5 percent of the total outflows in March.
For the first quarter of the year, the Philippines booked a net outflow of foreign portfolio investments amounting to $1.48 billion, a complete reversal of the $293.46 million net inflow recorded in the same quarter last year.
Inflows plunged by 32.1 percent to $3.7 billion from January and March this year compared to $5.46 billion in the same quarter last year, while outflows increased slightly to $5.19 billion from $5.16 billion.
The BSP noted the uncertainties due to the impact of the COVID-19 pandemic to the global economy and financial system.
It also cited other key events earlier in the year such as the continuing geopolitical tensions between the US and Iran, the ongoing trade negotiations between the US and China as well as the renegotiation of the contracts of the country’s water concessionaires.
The BSP expects the Philippines to book a net inflow of foreign portfolio investments of $8.2 billion this year.
In 2019, the country recorded a net outflow of $1.9 billion, a reversal of the $1.2 billion net inflow in 2018 and the $8 billion forecast set by the BSP.
BSP Governor Benjamin Diokno is not keen on the entry of hot money or speculative funds into the country, calling this type of funds as “destabilizing.”
“That what’s called hot money, we don’t want hot money. They are taking advantage of the Philippines. They come in when things are good and then they exit as soon as things are bad at a click of a button,” Diokno said earlier.
Source: https://www.philstar.com/business/2020/05/09/2012695/hot-money-outflow-highest-6-years