‘Hot money’ outflows surge to 4-month high

Foreign portfolio investments that left the country soared to its highest level in four months in September, partly on account of the coronavirus disease 2019 (Covid-19) pandemic, according to the Bangko Sentral ng Pilipinas (BSP).

Data from the central bank showed on Thursday that net outflows of these investments, or “hot money” — so named because of how easily these enter and exit the economy — rose to $493.65 million last month, the biggest since May’s $1 billion.

These were also larger than August’s $126.76-billion outflows and the $231.71 million that fled in September 2019.

The latest figure resulted from inflows of $594.02 million and outflows of $1.08 billion.
In a statement, the BSP said the $594.02-million registered investments for the month were a 10.9-percent decrease from $666.51 million in August.

The bulk, or 92.5 percent, of these investments were placed in Philippine Stock Exchange (PSE)-listed securities, holding firms, property companies, food, beverage and tobacco firms, banks, and retail companies. The rest were put in government securities.

Singapore, United Kingdom, United States, Luxembourg and Switzerland were the top foreign investors last month. Their investments made up 82.6 percent of the total.

The $1.08-billion outflows grew by 37.1 percent from August’s $793.27 million. The US remained the main destination of the repatriated funds, accounting for 61 percent.
Hot money stayed in the negative territory in January to September, with net outflows at $4.4 billion, soaring by 238.46 percent from the year-ago amount.

The BSP said the year-to-date net outflows were “brought about by uncertainties due, among others, to the impact of the Covid-19 pandemic [on] the global economy and financial system.”

It also blamed the outflows on geopolitical and trade tensions, and certain corporate governance issues and extended quarantine measures in select regions in the country.
The Bangko Sentral expects net hot money inflows of $2.4 billion this year.

Commenting on the data, Rizal Commercial Banking Corp. chief economist Michael Ricafort attributed the latest outflows to “healthy profit-taking” in local markets, especially in fixed income markets.

“Healthy profit-taking in the local financial markets, triggered by relatively higher new Covid-19 local cases, delays in the US stimulus package since August 7, uncertainties over the US presidential elections, risk of a no-deal Brexit, and higher US-China tensions resulted [in] increased US/global market volatility and profit-taking in the global stock markets and bond markets after reaching new record highs in terms of price in the US and in many countries worldwide,” he explained.

For the coming months, Ricafort said hot money could improve amid recent gains in the local financial markets, especially in the local stock market, after the House of Representatives approved the P4.5-trillion 2021 national budget.

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