Hot money outflow surges in May 2018

MANILA, Philippines — Foreign portfolio funds reverted to a net outflow in May as investors opted to take their money out of the country due to higher US Treasury yields as well as rising investor concerns over the continued weakening of the peso and rising oil prices which put pressure on inflation, according to the Bangko Sentral ng Pilipinas (BSP).

“This may be attributed to higher US treasury yields and investor concerns on a weaker peso and rising oil prices which may affect inflation,” the central bank said.

The BSP said a net total of $206.35 million flowed out of the country in May, more than eight times the net outflow of $24.35 million recorded in May last year.

The latest figure was also a reversal of the net inflow of $1.13 billion and $279.29 million in March and April, respectively.

Foreign portfolio investments are also called hot or speculative money because of its flighty nature.

The US Fed raised benchmark rates by a quarter percentage point the other day as a follow up to the 25 basis point rate hike last March. The US central bank points to two more rate hikes, bringing the 2018 total to four increases instead of three.

As a result, the peso tumbled to the 53 to $1 level, hitting a fresh 12-year low on Wednesday. At yesterday’s trading at the Bankers Association  of the Philippines, the peso retreated further by four centavos to close at 53.270 from 53.230 to $1.

The BSP said foreign portfolio inflows fell 18.3 percent to $1.21 billion in May from $1.48 billion in the same month last year, while outflows declined six percent to $1.42 billion from $1.51 billion.

Top investors include the United Kingdom, US, Singapore, Malaysia, and Hong Kong that cornered 74.8 percent of the total. About 80 percent were invested in securities listed at the Philippine Stock Exchange (PSE) while close to 20 percent went to peso government securities.

PSE-listed securities and other peso debt instruments incurred net outflows in May, while peso government securities yielded net inflows.

The BSP said the outflows were primarily triggered by renewed geopolitical tensions between the US and China, as well as the continuous pullout of foreign funds from the stock market since February.

For the first five months, the central bank said the Philippines booked a net inflow of $797.19 million, reversing the $543.79 million net outflow recorded in the same period last year.

During the period, inflows surged 21.4 percent to $7.74 billion from $6.38 billion, while outflows steadied at $6.94 billion.

The BSP expects the country to incur a net outflow of foreign portfolio investments amounting to $900 million this year. The country booked a net outflow of $205.05 million last year, reversing the net inflow of $404.43 million in 2016 as more capital were repatriated from the country due to the series of rate hikes by the US Federal Reserve.