Hot money flows out of Philippines for 3rd straight month in January

MANILA, Philippines — For the third straight month, more speculative funds exited the Philippines as net outflow amounted to $486.1 million in January, reversing the $762.82 million inflow recorded in the same month in 2019.

The Bangko Sentral ng Pilipinas (BSP) traced the net outflow of foreign portfolio investments last month to the continuing geopolitical tensions between the US and Iran as well as the trade spat between Washington and Beijing.

The central bank also cited investors’ concern over the directive of Malacañang for the review of the contracts of water concessionaires as well as the impact of the global outbreak of the novel coronavirus disease-2019 (COVID-19).

Data showed the Philippines has been booking a net outflow in foreign portfolio investments since November with $354.32 million and $320.96 million in December.

The net outflow last month was the biggest since May when the country posted a net outflow of $749.84 million.

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

For the month of January, inflows plunged 40.1 percent to $1.23 billion from a year-ago level of $2.06 billion.

The BSP said about 66 percent of the inflows went to securities listed at the Philippine Stock Exchange (PSE), particularly property developers, holding companies, banks, telecommunications as well as food, beverage and tobacco firms.

On the other hand, a little over 34 percent went to peso government securities.

The top five investor countries, include the UK, the US, Singapore, Luxemburg and Hong Kong.

Likewise, outflow of hot money jumped by 32.5 percent to $1.72 billion in January from $1.3 billion in the same month last year. About 62 percent of total outflow went to the US.

The BSP expects the Philippines to register a net inflow of foreign portfolio investments of $8.2 billion this year.

In 2019, the country recorded a net outflow of hot money amounting to $1.9 billion, a reversal of the $1.2 billion net inflow in 2018 and the $8 billion forecast set by the BSP.

Inflows inched up by 3.6 percent to $16.6 billion last year from $16.03 billion in 2018, while outflows surged by 24.7 percent to $18.5 billion from $14.83 billion.

Major developments in 2019 include the trade tension between the US and China, the passage of the rice tariffication law, the country’s mid-term elections, easing inflation, and the reduction of the bank reserve requirement ratio.

Other issues include the heightened protests in Hong Kong, the attacks on Saudi Aramco’s oil facilities in Saudi Arabia which triggered the largest recent jump in oil prices, the rebalancing of the Morgan Stanley Capital International Philippines Index, President Duterte’s strong views on the alleged onerous provisions of concession agreement of both Maynilad Water Services and Manila Water, as well as the US House of Representatives vote to impeach President Trump.