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Philippines: Foreign fund exit persists in July when economy has reopened
MANILA, Philippines — More foreign funds flew out of the Philippines than entered for the fifth straight month in July, bucking optimism of an economic rebound after strict lockdowns were eased.
Foreign portfolio investments recorded a net outflow of $453.17 million last month, nearly double the previous month’s level, the Bangko Sentral ng Pilipinas (BSP) reported on Thursday. A net outflow means more placements left than entered.
Portfolio investments are also known as “hot money” to characterize the ease by which they enter and leave financial markets. They are mostly channeled in equity and bond markets and are susceptible to swings on investor sentiment.
Overall, gross inflows amounted to $719.11 million last month, but this was 29.5% lower than in June and were overtaken by gross outflows that reached $1.17 billion, which only dipped 6.6% month-on-month.
Fund exits last month occurred even as the main economic center of Metro Manila, and neighboring areas, have restarted business beginning June, coming off from stringent movement restrictions since March to slow the coronavirus pandemic. For the first 15 days of August, prohibitions were reinstated, following appeals from healthcare workers swamped by infection cases.
“(This is) brought about by uncertainties due, among others, to the impact of the COVID-19 pandemic to the global economy and financial system…,” the central bank said, adding that “geopolitical and trade tensions” between the US and China may have worsened the investment climate.
Locally, President Rodrigo Duterte’s attacks to Metro Manila’s water concessionaires early this year, and threats to unilaterally revisit their contracts, likely deterred foreign investors from placing bets, BSP explained.
In July, data showed 96.5% of inflows went to listed firms in the stock exchange, primarily utilities companies, holding firms, property enterprises, banks, and food, beverage and tobacco corporates. The balance of 3.5% of inflows, meanwhile, sought refuge in peso government securities.
By country, Singapore, the UK, the US, Bahamas and Hong Kong were the source of 84.6% of investments last month. On the flip side, the US, the world’s safe haven for investors, attracted 63.7% of total outflows.
From January to July, portfolio investments registered a net outflow of $3.76 billion, more than five times up from last year’s $671.82 million and have long surpassed BSP’s projection of $2.4 billion net outflows for the entire year. The tally may still move up or down in the coming months.
Last year, hot money recorded a net outflow of $1.9 billion. — Prinz Magtulis
Source: https://www.philstar.com/business/2020/08/27/2038216/foreign-fund-exit-persists-july-when-economy-has-reopened