Election jitters have caused heavy withdrawals of foreign portfolio investments or “hot money” to reach a seven-month high in April.
Bangko Sentral ng Pilipinas (BSP) data released Friday showed $1.63-billion worth of portfolio investments left the country in April, or a few weeks before the May 9 elections, to post the biggest outflow since September last year at $1.69 billion.
Foreign portfolio investments are in the form of placements in publicly listed shares, government and private sector IOUs and deposit certificates. Portfolio investments are considered short-term bets—hence the term hot money—because these placements may be pulled out quickly.
Outflows last month outpaced inflows of $1.27 billion, resulting into net outflows of $354.1 million. A net outflow meant more foreign portfolio investments left than entered the country.
Hot money outflows in April rose from $1.21 billion in March “due to profit-taking, coupled with concerns on the oil supply surplus, slump in Chinese equities, and the coming elections,” the BSP said.
Inflows of registered portfolio investments also dropped from $1.69 billion in March as the BSP noted there were “significant” placements on government securities at the end of the first quarter.
The net outflows at the start of the second quarter was the largest since the $542.5 million in August last year. It also reversed the net inflows of $482.4 million last March.
The net outflows in April also dwarfed the $31.1 million recorded during the same month last year.
The country actually posted net hot money inflows of $56.3 million as of end-April as four-month inflows of $4.85 billion exceeded the over $4.79 billion in outflows.
The end-April net inflows, however, were also dwarfed by the $1.73 billion recorded during the first four months of last year.
Over four-fifths of the foreign portfolio investments registered last April were in Philippine Stock Exchange-listed securities—mostly banks, food, beverage and tobacco companies, holding firms, property companies and telecommunication firms. A balance of 19.7 percent of the month’s total was invested in peso-denominated government securities.
According to the BSP, the top five investor-countries in April were Hong Kong, Luxembourg, Singapore, the United Kingdom and the United States, all of which accounted for 78.5 percent of the total. The US remained the top destination of outflows, receiving 83.2 percent of the hot money that left the country that month.