Hot money outflow accelerates in April

MANILA, Philippines — Speculative investors continued to skip the Philippines amid the general risk-off sentiment which prompted investors to liquidate their portfolios and keep money in cash due to heightened worries over the economic fallout from the coronavirus disease 2019 or COVID-19 pandemic.

According to the Bangko Sentral ng Pilipinas (BSP), the country recorded a net foreign portfolio investments outflow of $660.38 million in April, more than double the $298.83 million outflow recorded in the same period last year.

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

The inflow of foreign portfolio investments plunged by 36.7 percent to $627.02 million in April from $989.96 million in the same month last year.

More than 91 percent of investments registered in April were in securities listed in the Philippine Stock Exchange (PSE) particularly holding firms, property companies, banks, food, beverage and tobacco firms as well as telecommunication companies.

The remaining 8.8 percent went to investments in peso government securities.

The United Kingdom, US, Singapore, Hong Kong and Switzerland were the major sources of portfolio investments with a combined share of 85.5 percent.

On the other hand, the outflow of foreign portfolio investments was steady at $1.28 billion with the US receiving 61.7 percent of the total outflows in April.

For the first four months, the BSP said the Philippines registered a net outflow of $2.07 billion versus a net inflow of $37.27 million in the same period last year.

Gross inflows fell by 33.5 percent to $4.19 billion from January to April compared to $6.3 billion in the same period last year, while gross outflows stood at $6.26 billion, same as last year.

Aside from the impact of the COVID-19 pandemic, the central bank cited other factors including the continuing geopolitical tensions between the US and Iran, ongoing trade negotiations between the US and China and the renegotiation of contracts of the country’s water concessionaires.

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.”

Diokno said the central bank is reviewing the revised balance of payments (BOP) forecasts for 2020, including the latest estimate on foreign portfolio investments and foreign direct investments.

“With the unprecedented coronavirus pandemic and its adverse impact on global outlook and investor confidence, we recognize that any projection on external account performance would only be tentative and would have a high level of uncertainty,” Diokno told reporters.

The BSP expects a BOP surplus of $3 billion as well as a foreign direct investments of $8.8 billion this year.