Hot money outflow surges to $7.76 billion

MANILA, Philippines — More foreign funds exited the Philippines for the fifth straight month in July as investors continued to liquidate their holdings due to global uncertainties brought about by the coronavirus pandemic, according to the Bangko Sentral ng Pilipinas (BSP).

Foreign portfolio investments or hot money recorded a net outflow of $453.17 million in July, reversing last year’s net inflow of $15.02 million.

From January to July, the Philippines incurred a net outflow of $7.76 billion, almost 11 times the $706.28 million net outflow recorded in the same period last year.

“This is larger compared to the $706 million net outflows noted for the same period last year brought about by uncertainties due, among others, to the impact of the COVID-19 pandemic to the global economy and financial system, and other key events earlier in the year such as the geopolitical and trade tensions, and corporate governance issues involving the water concessionaires,” the BSP said.

Speculative funds have been flowing out of the country since March as investors opted to hold on to their cash or look for other investment havens amid the pandemic.

The Philippines incurred a net outflow of $961.08 million in March, $660.38 million in April, $1.01 billion in May and $235.38 million in June as the country imposed one of the longest and strictest lockdowns in the world after Luzon was placed under enhanced community quarantine in the middle of March to prevent the spread of the virus.

As a result, the country’s gross domestic product (GDP) contracted by a record 16.5 percent in the second quarter from 0.7 percent in the first quarter.

In all, the economy shrank by nine percent in the first semester, prompting economic managers to forecast a deeper contraction of 4.4 to 6.6 percent this year and a slower recovery of 6.5 to 7.5 percent instead of eight to nine percent next year.

Analysts said speculative investors continued to skip the Philippines amid the general risk off sentiment in the markets, prompting them to look for other investment havens. They also said investors are liquidating their portfolios and keeping money in cash due to heightened concerns over the adverse economic impact of the pandemic.

Gross inflows plunged by 57.2 percent to $719.11 million in July from $1.68 billion in the same month last year.

About 96.5 percent of investments went to listed securities in the Philippine Stock Exchange (PSE) and were channeled mainly to utilities companies, holding firms, property firms, banks and food, beverage and tobacco

companies. The remaining 3.5 percent went to peso government securities.

According to the BSP, major investor countries during the review period are Singapore, the United Kingdom, US, Bahamas and Hong Kong. These countries accounted for 84.6 percent of   total inflows.

Likewise, gross outflows fell by 29.5 percent to $1.17 billion in July from $1.66 billion in the same month last year. The   US received 63.7 percent of the total outflows.

For the seven-month period, gross inflows plummeted by 39 percent to $6.41 billion from $10.52 billion in the same period last year.

According to the BSP, the net outflow was a result of a drop in transactions for all investments including PSE-listed and peso government securities as well as other investments.

The Philippines recorded a net outflow of $1.9 billion last year, reversing the $1.2 billion net inflow in 2018.

For this year, the BSP has lowered its foreign portfolio investments projection to a net inflow of $2.4 billion instead of the original target of $8.2 billion.