More ‘hot money’ flee PH as Du30 gives US the snub

More “hot money” were pulled out during the week that President Duterte announced cutting economic and military ties with the United States, Bangko Sentral ng Pilipinas (BSP) data released Thursday showed.

From Oct. 17 to 21, a foreign portfolio investment outflow of $463.69 million exceeded a $412.02-million inflow, resulting in a $51.67-million net outflow.

The previous week also posted a higher net outflow worth $180.33 million.

“The third week of October saw a mix of international and domestic developments spark foreign selling across financial asset classes,” an economist at one of the country’s top banks said. The economist was referring to, among others, the hawkish tones of certain US Federal Reserve officials indicating an aggressive move towards higher interest rates.

“On the local front, this was also the week that the Philippine delegation went to China and certain comments delivered, which may or may not have affected market sentiment but judging from the amount of foreign outflows, it may just have given investors an excuse to sell,” the economist added.

To recall, Mr. Duterte on Oct. 20 announced in an investment conference in Beijing his decision to leave the US sphere of influence. The rough talking President later clarified it was not a severance of ties but a mere separation of foreign policies.

The net outflow registered in the third week of the month further narrowed the year-to-date hot money net inflow to $1.076 billion. Still, the $14.845-billion inflows were more than the $13.769-billion outflows, a reversal of the $437.3-million net outflow posted a year ago.

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 called “hot money” because these placements may be pulled out quickly.

The BSP expects the US Fed to keep interest rates steady ahead of the US presidential elections on Nov. 8 to temper market volatility.

“The Fed action is as expected, especially before the US elections. Analysts are parsing the statement and focusing on the word ‘some.’ Analysts say the Fed may have set the bar low for a December move, so if that move does materialize, then it wouldn’t come as a surprise to the market. That said, there is a lot to watch out for in the next week. And it’s not likely that markets would make large movements in the meantime,” BSP Governor Amando M. Tetangco Jr. said in a text message to reporters.