Hot money registers net outflow in 2019

MANILA, Philippines — About $1.9 billion in speculative funds flowed out of the country in 2019 amid various geopolitical issues, such as the trade tension between the US and China, as well as developments in the domestic market, according to the Bangko Sentral ng Pilipinas (BSP).

For December alone, net ouflow of $320.96 million was recorded, a reversal of the $278.11 million net inflow recorded in the same month in 2018.

According to the BSP, the net outflows of foreign portfolio investments, also called hot money, reached $1.9 billion in 2019, a reversal from the net inflow of $1.2 billion in 2018.

According to the BSP, the movement of hot money was affected by a slew of economic and geopolitical issues led by the trade tension between the US and China, attacks on Saudi Arabia’s oil facilities as well as the impeachment hearings on US President Donald Trump.

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,” the BSP chief said.

Inflows slightly grew by 3.6 percent to $16.6 billion in 2019 from $16.03 billion in 2018. This was outpaced by the 24.77 percent growth in outflows, which reached $18.5 billion compared to $14.83 billion in the previous year.

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

According to the BSP data, the bulk of recorded outflows last year represented capital repatriation, while the remaining 2.9 percent pertained to remittance of earnings.

About 75.1 percent of total outflows went to the US.

The BSP said 77.7 percent of inflows were securities listed in the PSE, mainly investment in holding firms, property companies, banks, food, beverage, and tobacco firms, and retail companies.

Another 22.3 percent went to peso government securities, while less than one percent went to other portfolio instruments.

The United Kingdom, the US, Singapore, Malaysia, and Hong Kong were the top five investor countries during the year, with combined share to total of 74.3 percent.